The crypto bill 2021– a reality or illusion !

What is Cryptocurrency Bill? When will crypto bill come into force? How government will tackle the serious rise of crypto traders? What information is available regarding the Crypto Bill?

1. As you know, Cryptocurrency has dominated almost every country, including India itself.
You may be shocked to know that India is now the country with the highest number of
people dealing in Cryptocurrency, surpassing the USA, Russia & many other countries.

Cryptocurrency is based on Blockchain technology, and hence no information is available
until & unless self-declared. Now, what is the Blockchain? A blockchain is a decentralized
ledger accessed among the nodes of a computer network. Similar to the database, a
blockchain stores information digitally. Blockchains play a crucial role in cryptocurrency
systems, such as Bitcoin, to maintain a secure and decentralized record of transactions.

You can refer to our previous blog, "Blockchain- Beyond Cryptocurrency", for more
explanation.

But this blog is all about valuable insights on the Cryptocurrency and Regulation of Official
Digital Currency Bill, 2021.

Overall Landscape

The government has decided to list Cryptocurrency and Regulation of Official Digital
Currency Bill, 2021 for presentation in the Lok Sabha in the winter session. The Bill was
previously presented in the budget session as well but could not be introduced as the
government decided to redraft it.

The government has no plans to boost the cryptocurrency sector in India; Finance Minister
stated it in the Lok Sabha recently. A Bill on Cryptocurrency and Regulation of Official
Digital Currency is expected to be present during the seventh session of the Lok Sabha.

2. Presumably, the government plans to ban all private cryptocurrencies, with certain
exceptions.

The new Cryptocurrency bill is set to empower regulators and government agencies,
including the Securities and Exchange Board of India (Sebi), Reserve Bank of India (RBI),
and the tax department, to scrutinize Know Your Customer (KYC) data of investors that
crypto exchanges have collected from clients. According to rumours, the new regulations
would mandate cryptocurrency exchanges to share their KYC data, which mainly includes
details of their investors, with the government. The new cryptocurrency framework would
also establish a uniform KYC process that every exchange must adhere to. As things stand
today, different cryptocurrency exchanges have different KYC processes.

The first control of Cryptoassets will remain with the existing crypto platforms, regulated
by India's Securities and Exchange Board (SEBI). A cut-off date will be issued for those
holding crypto assets to declare and bring under the crypto exchange platforms the SEBI
will regulate. Reserve Bank of India's proposed virtual currency has not been clubbed with
the new crypto legislation. However, the central bank will regulate issues related to
Cryptocurrency.

Some details by Finance Minister itself

Finance minister Nirmala Sitharaman stated on 30.11.2021, i.e. Tuesday, "The government
plans to table a redrafted bill on cryptocurrency in the winter session of Parliament after
the approval of Cabinet, and notified the Rajya Sabha that income earned from investing in
cryptocurrencies is taxable". She added, The Cryptocurrency and Regulation of Official
Digital Currency Bill, 2021 seeks to form a framework for designing the official digital
currency to be issued by the Reserve Bank of India (RBI). According to the words on the
street, it aims to ban all private cryptocurrencies while promoting the underdog technology
of Cryptocurrency and its benefits for certain exceptions (not defined till so far).

The income earned by crypto and other related services providing platforms is liable to tax
under Business or Profession Head under Chapter-IV of the Income-tax Act, 1961. She
added that the applicability of the tax rate would depend on the status and category of the
taxpayer.

On another query, whether the government has conducted any study for regulating
Cryptocurrency, Finance Minister said that a study was performed by the government
through a research organization on 'Virtual Currencies: An Analysis of the Legal
Framework and Recommendations for Regulation' in July 2017. After that, the government
constituted an Interministerial Committee (IMC) on 2nd November 2017 under the
Chairmanship of Secretary (Economic Affairs) to study the issues related to Virtual
Currencies and propose specific action to be taken in this matter.

For regulation of cryptocurrencies, she further clarified that the question of monitoring or
regulating cryptocurrency transactions, if any, is consequent to the passage of the Bill in
Parliament."

3. What are we going to witness new?

In 2019, the Bill was named 'A Blanket Ban'; The 'Banning of Cryptocurrency & Regulation
of Official Digital Currency Bill, 2019' stated that no one should mine, generate, hold, sell, or
deal in issue, transfer, dispose of or use Cryptocurrency.

Fast-forwarding to 2021, a number of things have changed. The Bill is now called
'Cryptocurrency and Regulation of Official Digital Currency Bill, 2021', which was first
presented for the Budget session but was deferred for more comprehensive consultations.
Since its inception, the industry has witnessed exponential growth with greater
participation. The government also consulted crypto associations, exchanges and other
experts to decide on the way forward, fueling optimism among stakeholders.

Reportedly, there will be some government's own recognized platform on which crypto
trading will be done. So, there may be a chance for a new regulatory body or
cryptocurrencies to be brought under the Reserve Bank of India (RBI).

Also, since crypto involves cross-border transactions, a Securities and Exchange Board of
India (SEBI)-like body will be required to monitor trades.

Talking about taxation, the government plans to bring investments in Cryptocurrency by
Indian citizens on domestic & international platforms under the ambit of Income Tax
instead of a straight outright ban. There are currently no specific guidelines under Income
Tax Act, 1961. But it's more probable that a high rate will be used to slow down the rush
that Indian crypto exchanges have witnessed over the past two years.

A glimpse: How the other countries regulated the Cryptocurrency

1: United Kingdom: All the businesses engaged in Cryptocurrency related activities in the
UK have to register with the UK's Financial Conduct Authority (FCA). Crypto-businesses are
required to apply for the 'Authorized Payment Institutions' license. BCB Payments Limited
was the first crypto asset company to get this license in the UK. Under UK law, all crypto-
asset businesses must comply with Anti-Money Laundering (AML) & Combating the
Financing of Terrorism (CFT). Bitcoins are recognized as property under UK law.

2: Singapore: Trading in cryptocurrencies is legal and regulated by the Monetary
Authority of Singapore under Singapore's Payment Services Act, 2020. Crypto-Asset
businesses must obtain a license to operate on the cryptocurrency platform. Public issues
of digital coins are also regulated under Singapore's Securities and Futures Act, 2001. One
of India's largest cryptocurrency exchanges, CoinDCX, migrated its holding to Singapore.
The startup has till now raised over INR 100 crores from global investors.

3: Indonesia: It initially banned Cryptocurrency but then legalized it. Previously in January
2018, Indonesia banned all parties involved in digital currency transactions. However, in
2019, Indonesia published regulations to regulate the trading of cryptocurrencies as a

4. commodity under its Commodity Futures Trading Regulatory Agency(CFTRA). Any entity
dealing in Cryptocurrency as commodity futures must comply with AML/CFT norms. The
entities must also report to the Indonesian Financial Transaction Reports and Analysis
Center.

4: Canada:1 In 2018, Canada issued a notice clarifying that securities law compliances will
apply to crypto-businesses offering coins or tokens. In January 2020, another statement
explained the situations where securities law would apply to platforms facilitating trading
of Cryptocurrency. From June 2020, Canada's money laundering law requires all entities
dealing in digital currency to register under the Financial Transactions and Reports
Analysis Centre of Canada (FINTRAC) and implement the applicable AML/CFT measures.

Thus, all the above countries that have introduced laws to regulate cryptocurrency trading
have taken good care of fraud and money laundering activities; they have subjected
cryptocurrency businesses to the respective AML/CFT measures. India can also follow a
similar approach to this.

All in all, India is yet to witness the upcoming regulations for Crypto Bill. Some information
is already on the street, along with some rumours. We currently don't know which cryptos
will get banned and declared official. This step is taken to protect our Real Currency, i.e.
Rupees, so its value remains in the global market for foreign exchange. As we know, there's
no actual business behind Cryptocurrency; people are just trading money for money.
Banning Cryptocurrency at a single go could significantly impact the economy in terms of
capital loss. The government has taken such a right decision for making it legalized.

Source:https://www.manishanilgupta.com/blog-details/the-crypto-bill-2021-a-reality-or-
illusion