From Imposing Penalty To Banning Crypto E2E Transfers: Latest Developments On Much Anticipated Crypto Bill

With each passing day, everyone¡¯s keenly waiting for the new Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 to be tabled in the ongoing winter session of Parliament, which ends barely in two weeks, on December 23rd 2021. And day by day, there are new developments being heard about the possible contents of this much anticipated Bill.

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The Deadline and Penalty

As per the latest insights and information provided by those aware of the development, the union government will probably give existing crypto holders a deadline within which they need to declare their assets and meet any new rules. The government is expected to direct Indian users to not just reveal but wind up their holdings with foreign crypto exchanges and hence, move their holdings to India and declare them within an expected period of 60 to 90 days.

Any violators, whether individuals or corporations, could be fined as high as ?20 crores or even imprisoned for 1.5 years if the expected contents of the proposed legislation to regulate crypto are to be believed.

It is expected that the government plans a "general prohibition on all activities by any individual on mining, generating, holding, selling, (or) dealing" in digital currencies as a "medium of exchange, store of value and a unit of account". The bill aims at both consumer and investor protection, besides preventing tax evasion and money laundering. Flouting these rules can even make one liable to non-bailable arrest without a warrant.

Also Read: Little Known Cryptocurrency Omicron¡¯s Value Gets On A Rollercoaster After Covid Variant Named After It

Possible ban on exchange-to-exchange transfers

The proposed Cryptocurrency Bill is also expected to put a blanket ban on exchange-to-exchange transfers in the country and restrict certain types of wallets masking identities. To do so, the government is expected to put in place a mechanism to monitor Rupee outflow wherein exchanges will have to open up their books or ledgers to regulators like SEBI when they tally the buy-side and sell-side on a quarterly basis, as per the information given by a source close to the ongoing developments.

Also, the government may only allow Indian exchanges to operate, and investors will be asked to move their crypto assets to Indian wallets for better monitoring and regulatory oversight.

To do so, the exchanges might have the same restrictions as other stock or commodity exchanges regarding the amount of money that can leave India and how the trade would happen. This is one of the steps towards regulating the crypto industry in India.

Uniform Wallet

Reportedly there is also a proposal to have a uniform wallet, something similar to a Demat account. But given the complex technologies and vacuum in the crypto industry at present, it might be difficult to implement it.

Crypto-asset, not a currency?

The new Crypto Bill is likely to replace the term Cryptocurrency with ¡®Cryptoassets¡¯, thus implying that crypto can only be used as an asset and not as a currency. Even the non-executive chairman of Infosys, Mr Nandan Nilekani had dropped a hint in his recent statement wherein he said that crypto-assets can be used to bring about more financial inclusion.

Also Read: How To Evaluate Crypto And Return On Investment For Investors

Major Bank Opens doors to crypto community

In what seems to be a big positive step from the banking industry, towards adoption and inclusion of the Crypto community, Kotak Mahindra Bank has reportedly become the first to open its gates to crypto trading. It recently announced a partnership with a leading crypto exchange WazirX, hence allowing crypto traders to use Kotak¡¯s banking services to liquidate their funds. This partnership is being seen as a major breakthrough for the crypto community, given that the Indian banks have remained hesitant towards getting involved in the crypto community in the past.

Closed-Loop System

Another development, as per sources, is that the government is formulating rules that will regulate exchanges in a closed-loop system, hence disallowing the transfer of cryptocurrencies among exchanges and placing restrictions on non-custodial wallets like meta-mask. But the step to stop meta-mask type non-custodial wallets is impossible, as it¡¯s just like restricting the internet. It's vital to remember that currently, some Indian exchanges already operate in a closed-loop, preventing investors from transferring crypto-assets off the platform.

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