Experts divided on how far India’s ‘private crypto’ ban will go

Previous documents from the Indian government indicate that it believes any cryptocurrencies not issued by the government are considered private and, therefore, could be banned.

Government documents from 2019 have been cited by an Indian crypto expert to suggest that the proposed ban on all “private cryptocurrencies” could include just about every crypto. 

The Indian government this week announced it would introduce the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 when it convenes at the Winter Session on Monday.

The bill seeks a legislative vote on creating an official digital currency while imposing a ban on “all private cryptocurrencies.” However, there seems to be a lot of confusion regarding what exactly constitutes a “private cryptocurrency,” with some users speculating it could refer to “privacy” coins such as Monero (XMR) or Zcash (ZEC).

Naimish Sanghvi, founder of crypto news website Coin Crunch India, explained in a Thursday interview on India Upfront that by the government’s definition, private crypto could mean just about every cryptocurrency there is. He said:

“In the 2019 Department of Economic Affairs report on cryptocurrency, they essentially said that everything that is non-sovereign is designated as a private cryptocurrency.”

“And by that logic, it means that Bitcoin and Ethereum will come into that definition,” he said, adding that “anything issued by the government is public and everything issued by private players is public.”

Looks like all cryptocurrencies are going to be banned in India. Some people took private cryptocurrencies to mean Monero, ZCash, etc. Not so. They mean all of them. https://t.co/Bx4dyX5M0u

— ciarán.eth (@C1aranMurray) November 24, 2021

The 2019 report in question recommended that “all private cryptocurrencies, except any cryptocurrency which may be issued by the government, be banned in India.” It stated:

“All these cryptocurrencies have been created by non-sovereigns and are in this sense entirely private enterprises.”

But Rohit Kundliwal, marketing manager at Indian crypto exchange WazirX, urged for calm and downplayed fears of an outright ban.

In a LinkedIn post on Wednesday, Kundliwal pointed out that crypto cannot be banned, only regulated, and that there is no clarity on what constitutes a private cryptocurrency.

He added that “Shri Narendra Modi, Nirmala Sitaraman, Finance Ministry and many prominent and sane politicians have told multiple times that there will not be a blanket ban on crypto.”

Meanwhile, Indian Shiv Sena Member of Parliament Priyanka Vickram Chaturvedi said in a Wednesday interview with India Today that the proposed ban is a “move backward and a little too late.” She said:

“Banning private cryptocurrencies is basically ending the entire idea of a new fintech that can emerge as a huge employment and generator for the new economy.”

She said that the government must “facilitate an environment which is evolving and thriving. The impact of doing this... is that you are killing this entire space.”

Related: India set to reduce GST paid on crypto exchange fees from 18% to 1%

The market reacted dramatically to the news of a possible ban, with prices on WazirX plummeting on Wednesday morning at 3:30 am UTC as users scrambled to sell their holdings. The panic selling event tanked the price of Bitcoin (BTC), Ether (ETH) and Cardano (ADA) in double-digit local price depreciation.

On Nov. 18, Indian Prime Minister Narendra Modi called on all democratic nations to work together to regulate cryptocurrency, specifically Bitcoin, to “ensure it does not end up in the wrong hands which can spoil our youth.”