The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 seeks to prohibit all private cryptocurrencies in India in the Winter Session of Parliament starting November 29.
It, however, allows for certain exceptions to promote the underlying technology of cryptocurrency and its usage.
Former Finance Secretary Subhash Chandra Garg told IANS that cryptocurrencies don't function and provide services as currencies only.
"When you 'ban' crypto currencies what exactly do you ban? Similarly, what are the permissible exemptions? Do you permit crypto currencies to make in platform payments the largest exemption issue? What is the manner you permit purchase of exempted cryptocurrencies for exempted use by sovereign currencies?" he asked.
The biggest matter which will need to be seen in the proposed bill is how are crypto platform going to be permitted to produce goods, services and assets using the versatile technology of blockchain and cryptography when its use as a currency-asset, elaborated Garg who headed the inter-ministerial committee (IMC) that drafted the cryptocurrency bill.
According to Shivam Thakral, CEO, BuyUcoin, the crypto bill should be flexible enough for young Blockchain projects to flourish.
"We also request the government to give immediate clarity on the taxation and filing of crypto assets," he said.
Prime Minister Narendra Modi had earlier said that all democratic countries need to work together on cryptocurrency and ensure that it does not end up in the wrong hands.
Giving an example of the virtual currency, he had said: "Take cryptocurrency or Bitcoin for example. It is important that all nations work together on this and ensure it does not end up in the wrong hands, which can spoil our youth."
Several high-profile meetings have been held to discuss the regulation of cryptocurrencies in recent days. The Parliamentary Standing Committee had also called for the regulation on cryptocurrencies and its ecosystem.
Another objective of the Crypto bill is "to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India".
Garg said that the move to create a legal framework for issuance of digital rupee is most welcome.
"I hope the bill does not limit RBI's choice for digital rupee technology. A dematerialised rupee is a much better option than rupee created on Blockchain crypto technology platform," he told IANS.
New Delhi-based cyber law expert Virag Gupta said that the delay in bringing a law has given an opportunity to certain exchanges to create a parallel empire of cryptocurrency.
"Non-regulation of cryptocurrency is creating a big risk to national security and individual investors in India. The bill should give legal protection to the Blockchain technology and the official digital currency of the country," he told IANS.
Besides making a law on crypto, the government should also make necessary provisions in the Banking Regulation Act, 1949, the RBI Act, 1934 and the Payment and settlement Systems Act, 2007 to "ensure proper safeguard and least judicial intervention in crypto matters", Gupta added.
Garg said that the crypto bill should ensure it does not kill new innovations around Blockchain, and create an ecosystem that actually promotes the technology.
According to Sathvik Vishwanath, Founder and CEO, Unocoin, the crypto industry needs to wait and watch till the bill is tabled in the Parliament, as it is "immature right now to try to decode what exactly is coming".