Centre To Create Official Digital Currency After Banning Private Cryptocurrencies In India By Introducing A Bill

In the upcomimg winter session of Parliament, the Central Government has proposed to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

PURPOSE OF THE BILL 

According to a Parliament bulletin, "The stated intent of the Bill is to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India."

As per the list of business, the Bill seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.

It further seeks to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India.

QUASHING OF RBI NOTIFICATION AND GOVERNMENT RATIONALE

Last year, RBI had issued a notification preventing regulated entities from dealing in virtual currencies. However, it was quashed by the Supreme Court on the grounds that the curbs were disproportionate. 

The Government was averse to cryptocurrencies being treated as a currency, as currency notes and coins are backed by statute and regulated by the RBI in consultation with the government.

"The currency has the backing of the sovereign. It can be regulated at every level. In case of cryptos getting the status of currency, the problem remains, who will provide the guarantee," said an official.

RATIONALE OF THE APEX COURT 

While quashing the RBI notification preventing regulated entities from dealing in virtual currencies, the Supreme Court had stated that :

When the consistent stand of RBI is that they have not banned Virtual Currencies and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate.