The Inter-Ministerial Committee on Virtual Currency, which operates under the chairmanship of Subhash Chandra Garg, has recently presented its report along with the Draft Bill ‘Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019’. This report indicates a significant move towards the restriction and regulation of digital currencies in India. The legislation puts forward several provisions concerning digital currencies, their legal status, and associated penalties for unlawful activities.
Provisions of The Draft Bill
The draft bill explicitly states that cryptocurrency cannot serve as a valid or recognised legal tender across India. Therefore, no one within India’s territorial boundaries can mine, produce, hold, sell, deal in, issue, transfer, dispose of, or use cryptocurrency in any form. However, the central government maintains the authority to declare the Digital Rupee as legal tender, but only if the Reserve Bank of India gives its consent.
The Role of Central Government and Reserve Bank
The Reserve Bank possesses the power to recognise any official foreign digital currency as foreign currency within India. Additionally, the central government can provide immunity for any offences under the act, based on the recommendations of the investigating agency. However, it is not obligatory for the central government to adhere to these recommendations.
Regulation of Distributed Ledger Technology
The legislation does not dismiss the use of Distributed Ledger Technology (DLT) for creating networks that offer financial or other services, or that facilitate value creation. However, such networks must not involve the use of cryptocurrencies. DLT, with blockchain being one type, functions as a decentralised database spread across numerous nodes or computing devices.
Penalties and Legal Consequences
| Direct or indirect use of Cryptocurrency | Penalty |
|---|---|
| First offence | Fine or imprisonment up to 1 year or both |
| Repeat offences | Imprisonment up to 10 years and/or fine |
| Maximum fine amount | The greater of – three times the loss or harm caused by the person, or three times the gains made by the person |
Court Empowerment and Immunity Limitations
The court is able to transfer any fees recovered to the Consolidated Fund of India. While the central government can give immunity for any offence under the act, no such immunity will be granted for cases where proceedings for the prosecution of any such offences had begun before the receipt of application for immunity.
Meaning of Digital Rupee
The draft bill refers to ‘Digital Rupee’, defined as a form of currency issued digitally by the Reserve Bank and sanctioned by the Central Government as legal tender.
