Experts disagree on the definition of “private cryptocurrency” as the Lok Sabha considers the measure.
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Experts disagree on the definition of “private cryptocurrency” as the Lok Sabha considers the measure.

Following news of the government presenting the Cryptocurrency Bill, which wants to restrict all “private cryptos” in India, with specific exceptions to encourage the underlying technology, the cryptocurrency market plunged. In the forthcoming winter session, which begins on November 29, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is expected to be tabled in Parliament.

“The Bill also attempts to outlaw all private cryptocurrencies in India,” the paper adds. “However, it provides for specific exclusions to encourage cryptocurrency’s underlying technology and purposes.” These are a type of cryptocurrency that enables private and anonymous blockchain transactions by concealing the source and destination of the transaction. However, the definition of ‘private’ remains ambiguous, adding to the uncertainty.

Some analysts believe it implies that all cryptocurrencies other than the Central Bank Digital Currency (CBDC) would be prohibited, while others believe it means that cryptos without a public ledger to trace transactions will be prohibited.

This is “an awful deja vu” for Sharat Chandra, a blockchain and rising enthusiast.

“The fact that regulators are still wrestling with the complexities of this transformational and quickly changing technology shows that they are still grappling with the phrase “private cryptocurrency,” Chandra told indianexpress.com.

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He feels that outright prohibition of Bitcoin is not the best strategy to combat money laundering and terrorism.

“The government should licence entities that can engage in crypto-related activities, enforce AML and KYC regulations in accordance with global FATF (Financial Action Task Force) guidelines, and hold them accountable to law enforcement and taxation authorities,” he said, adding that there are enough ways and means to allay concerns about terrorism financing and money laundering.

Different interpretations of the term “private cryptocurrencies” have also created a fearful climate among retail cryptocurrency investors. “Prominent coins such as Bitcoin and Ethereum are public cryptocurrencies and do not come under the purview of this declaration,” said Kazim Rizvi, founder of The Dialogue, a privacy policy think group.

The government’s statements, on the other hand, have worried investors.

“Cryptocurrencies are currently selling at a 20 to 30% discount owing to the government’s instability,” said Hitesh Malviya, founder of itsblockchain.com, a Blockchain cryptocurrency blog.

“Bitcoin, Ethereum, and other prominent cryptocurrencies are not controlled or managed by any private entities— transactions are on the public ledger, and every major economy recognises them as public currency,” Malviya says.

However, he noted that a large number of cryptocurrencies are now being marketed by commercial firms in the nation. “Such crypto currencies have been the target of massive frauds.” “It’s a smart approach if the government wants to outlaw such privately owned cryptocurrency,” he added.

There are about 10,000 public and private cryptocurrencies in circulation as of November 2021. “I am a great supporter of countries enacting cryptocurrency laws. There are at least 20 to 30 cryptocurrencies with a clear use case for their crypto product, but there are over 10,000,” said Anirudh A Damani, managing partner at Artha Venture Fund.

While speculation over the bill will continue, experts believe that investors should avoid panic selling and instead wait until the law’s contents are made public before making an educated judgement.

Most bitcoin exchanges, on the other hand, had a uniform response praising the decision. While CoinDCX and WazirX hailed the measure as a watershed moment for India, BuyUcoin, another cryptocurrency exchange, expressed optimism about it.

“We feel there is a compelling justification for an uniform procedure for new cryptocurrencies before they are launched on any Indian exchange for trade,” BuyUcoin CEO Shivam Thakral stated.

Meanwhile, Jay Hao, the CEO of OKEx.com, has asked the government to be more subtle in its approach. “With the passage of the cryptocurrency bill, India will begin an exciting road to become the world leader in crypto, Defi, and NFTs,” he said in a statement.

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