Hi everyone,
We all have been reading a lot of news on crypto ban in India recently and some of us have observed a lot of fear mongering in these articles. Therefore, I am writing this article with all the facts backed with press releases by government official website (pib.gov.in, dea.gov.in, etc.), Supreme court orders and the RBI notifications from RBI's official website (rbi.org.in). I am completely focusing on the facts and trying to refrain from expressing my personal opinion in this article. I trust you will find this article useful from a factual perspective.
2013 to 2017
RBI issues 3 notification in December 2013, February 2017 and December 05, 2017 cautioning Indians from using crypto/virtual currencies due to the potential financial, operational, legal, customer protection and security related risks associated with these. These are merely cautions and does not call for any ban. Further the Ministry of Finance also makes a press release stating that virtual/crypto currencies are like Ponzi schemes which can be used to cheat people and also used for various illegal activities.
You can read these RBI Official Press releases in https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=30247 , https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=39435 and https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=42462 and the Press release by Ministry of Finance on https://pib.gov.in/PressReleasePage.aspx?PRID=1514568
November 2017
The Government constitutes an Inter-Ministerial Committee (IMC) on 2.11.2017 under the Chairmanship of Secy (Economic Affairs), with Secy (Ministry of Electronics and Information Technology), Chairman (Securities and Exchange Board of India) and Dy. Governor, Reserve Bank of India as Members, to study the issues related to virtual currencies and propose specific action to be taken in this matter. I was not able to find any press release in 2017 on this, but this was later revealed in press release by government in July 2019, provided below (https://pib.gov.in/Pressreleaseshare.aspx?PRID=1579759).
April 2018
RBI issues the notification no. RBI/2017-18/154 wherein entities that are registered with RBI, such as Banks, Forex traders, etc. are not permitted to deal with any person/ company/ firm dealing in crypto/virtual currencies. By virtue of this notification, all activities of the RBI registered entities in respect of crypto currencies is prohibited, thereby the entire ecosystem for crypto currencies such as banking channels were cut off. However, this notification in itself did not ban cryptocurrencies.
You can read the notification no. RBI/2017-18/154 (DBR.No.BP.BC.104 /08.13.102/2017-18) in this link: https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11243
February 2019 to July 2019
In July 2017, the Ministry of Finance makes a press release that the Inter-Ministerial committee has submitted its report on Virtual currencies along with the draft bill titled 'Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019' in February 2019 and the same was placed on the website of Department of Economic Affairs. The report contains the following:
the positive aspect of distributed-ledger technology (DLT) and suggested various applications, especially in financial services, for use of DLT in India for processes such as loan-issuance tracking, collateral management, fraud detection and claims management in insurance, and reconciliation systems in the securities market.
given the risks associated with private cryptocurrencies and volatility in their prices, the Group has recommended banning of the cryptocurrencies in India and imposing fines and penalties for carrying on of any activities connected with cryptocurrencies in India.
recommends exploring into official Central Bank Digital Currencies ('CBDC')
recommends Government may establish a Standing Committee to revisit the issues addressed in the Report
Further, the draft bill contains the legal regulations for extensive ban of cryptocurrencies and punishment for each contravention. Further, it lays down a foundation for implementation of official Central Bank Digital Currencies ('CBDC')
You view the press release in https://pib.gov.in/Pressreleaseshare.aspx?PRID=1579759 and view the report and draft bill on https://dea.gov.in/sites/default/files/Approved%20and%20Signed%20Report%20and%20Bill%20of%20IMC%20on%20VCs%2028%20Feb%202019.pdf
Further during this time a Rajya Sabha member also raised a query whether cryptocurrency was banned in India and several other questions. In response Anurag Thakur, Minister of State for Finance, replied that it was not banned and that government had received the Inter-Ministerial Committee's report. This can be read here: https://pqars.nic.in/annex/249/Au2591.pdf
February 2020
RBI issues a bulletin wherein it acknowledges that Distributed ledger system can be used in various industries and financial institution. Further, the bulletin also talks about Central Bank Digital Currencies ('CBDC') being implemented by various countries.
You can read this article on https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=18766
March 2020
In response to the Writ petition filed by Internet and Mobile Association of India (which included a lot of petitioners) the Supreme Court of India ruled that RBI could not restrict regulated entities from dealing with companies engaged in dealing with cryptocurrencies. It states that when the consistent stand of RBI is that they have not banned virtual/crypto currencies and when the Government of India was unable to take a call to ban the same, RBI could not restrict its regulated entities either.
You can read the full judgement in this link: https://main.sci.gov.in/supremecourt/2018/19230/19230_2018_4_1501_21151_Judgement_04-Mar-2020.pdf
January 2021
In the Lok Sabha Bulletin released on January 29, 2021 lists the Cryptocurrency bill under the new bills to be introduced in the Lok Sabha. You can find the same in the this link: http://loksabhadocs.nic.in/bull2mk/2021/29012021.pdf (Go to Page no. 26 and Item no. 12 under the New bills Section). This bill is titled "The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021" with the description "To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses." However, the text of the bill is yet to be presented.
February 2021
In a Q&A session in the Rajya Sabha questions are raised on the ban of cryptocurrency and how government plans to implement it, in spite of Supreme Court quashing RBI's restrictions. The Finance ministry responded that the Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. However, The Government will explore use of block chain technology proactively for ushering in digital economy. Further, response quoted that the Government would take a decision on the recommendations of the IMC regarding banning of cryptocurrencies and the draft bill after consideration would be introduced in the Parliament.
You can read the Rajya Sabha Q&A here: https://pqars.nic.in/annex/253/AS79.pdf
March & April 2021 - Only presented in News
Anurag Thakur, Minister of State for Finance, says that government welcomes blockchain as an emerging technology and that new ideas must be evaluated, explored and encouraged with an open mind at an event arranged by Entrepreneurs' Organization.
Read more at: https://economictimes.indiatimes.com/news/economy/policy/government-open-to-evaluate-explore-cryptocurrencies-says-anurag-thakur/articleshow/81367065.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Further he said the Government of India is open to adopt state digital currency and they want to promote digital adoption across sectors under the Digital India Initiative. He also mentioned Reserve Bank of India is working towards India to have its own digital currency.
Read more at: https://bfsi.economictimes.indiatimes.com/news/fintech/approaching-the-cryptocurrency-regulation-with-an-open-outlook-investor-protection-anurag-thakur/82027897
I hope this collection of press releases, notifications and bulletin is useful. Would be happy to have your thoughts and corrections, if any.