An exit window to cryptocurrency holders

All the private cryptos, except any issued by the state, would be prohibited in India. That was announced earlier.

Now, an exit window to cryptocurrency holders is being thought as banning will deal a blow to investors holding them for years.

The framework may have a grace period of three to six months for investors before prohibiting the possession, trading, mining, and issuing of cryptos.

Issues relating to cryptos, consequences of banning and possible substitutes of blockchain technology — an advanced technology Bitcoin uses – have been discussed.

Concerns were raised by stakeholders, including Reserve Bank of India (RBI) on virtual currencies.

The potential damage in the case of a ban has been discussed.

The committee is expected to give its inputs, which will be examined by the ministry and department concerned before finalising the Cabinet draft note on cryptos.

Unlike fiat currencies, cryptos were not controlled by any central authority.

The new regulations will give clarity on controlling such currencies, which could be misused.

However, there is a difference in controlling and banning the asset/currency, which the framework will address.

Even if certain forms of cryptos are declared illegal, some grace period has to be given, or else it will create havoc in the market

The government had been receiving suggestions highlighting advantages and disadvantages of cryptos.

Some are valid. For example, a resident Indian can remit money abroad legally for many purposes, including investment in overseas assets.

Hence, they may trade cryptos through overseas brokerages. Restricting crypto trades will impact such regulations.

The government recently showed some openness to currencies like Bitcoin. And said that India is not shutting out all options when it came to cryptos or blockchain and fintech.

The cryptocurrency market is booming and is the reason the bill has delayed, especially when Bitcoin touched $61,000.

RBI has flagged concerns about cryptos owing to financial stability, which was not in sync with the government’s latest position.

However, more deliberations are required.

The RBI had banned such currencies through an order, which was struck down by the Supreme Court last year.

In India, despite government threats of a ban, transaction volumes are swelling and 8 million investors now hold Rs 10,000 cr ($1.4 billion) in crypto-investments as per industry estimates.