Move to ban cryptocurrencies is unfortunate

Many major democracies, such as the US, Canada and the UK, allow the use of Bitcoin. Even the tiny Latin American nation, El Salvador recently accepted Bitcoin as legal tender.

- RAVI SHANKER KAPOOR

Bans and prohibitions are in fashion. At all levels-Central, state, and local government is on a spree to outlaw liquor, meat, free speech. And now cryptocurrencies or virtual currencies (VCs) like Bitcoin appear to be next.

The Narendra Modi government intends to prohibit" cryptocurrencies. In the winter session, it wants to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

The objective is: “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." The RBI must be very happy, not just because it would get the mandate to issue digital currency, but also because the move endorses its view on cryptocurrencies. It is a well-known fact that the central bank has been waging a war against them. It even banned them, though its decision was overturned by the Supreme Court.

Despite the apex court verdict, RBI has stuck stubbornly to the demand to proscribe all private VCs. In September, the RBI Governor said that the central bank had conveyed its “serious and major concerns" over virtual currencies to the government. The so-called concerns, as we shall see, are misplaced at best and smack of the central bank's statist approach at worst.

On 4 March 2020, a three-judge bench of the Supreme Court had invalidated the central bank's ban on cryptocurrencies. It was imposed in April 2018.