India's crypto bill may reportedly restrict exchange-to-exchange transfers and even launch its own crypto wallet

India's crypto bill may reportedly restrict exchange-to-exchange transfers and even launch its own crypto wallet
According to Indian Finance Minister, Nirmala Sitharaman, the crypto bill is slated to be introduced during the ongoing Winter Session of Parliament once it's approved by the cabinetCanva/IANS/BI India
  • India is currently in the midst of bringing in new regulations to govern the crypto industry.
  • According to a report by the Economic Times, the upcoming crypto bill may place a blanket ban on exchange-to-exchange transfers.
  • The government may also launch its own crypto wallet and restrict the use of wallets that mask the owner’s identity.
India’s upcoming crypto bill, that is yet to be introduced in Parliament, may not be looking to ban cryptocurrencies. However, the Economic Times reports that exchange-to-exchange transfers are likely to see restrictions.

According to the Indian publication, sources believe there will be a blanket ban on trade among bourses, restrictions on wallets that mask the owner’s identity and the blocking of Google Chrome extensions that allow users to move around more than 4,000 cryptos — think MetaMask and other wallet integrations.

The Indian government may also be looking at the creation of a uniform wallet, like a demat account, to keep an eye on retail crypto transactions.

Crypto exchanges will have to provide quarterly disclosures to the government

Sources told the Economic Times that the government is mulling over a mechanism that will monitor all inflow and outflow of the Indian rupee on Indian crypto exchanges, and only they will be allowed to operate within the country. This may involve the exchanges opening up their ledgers to the government on a quarterly basis.

The aim is reportedly to bring crypto exchanges on the same level as other stock or commodity exchanges in the country. And, keep crypto transactions from working around the Foreign Exchange Regulation Act (FEMA).

This comes after NDTV reported that the Securities and Exchange Board of India (SEBI) is likely to be roped in to regulate the crypto industry. The same note also highlighted that investors in India won’t be allowed to store their holdings on foreign crypto exchanges or private wallets.

Once the bill becomes law, these individuals will reportedly be given some time to make the required changes. Failing to do so could result in penalties within the range of ₹5 crore to ₹20 crore.

India may build its own native crypto wallet

The report by the Economic Times also highlights that, since the government will restrict the operation of wallets owned by private players, India may create a uniform wallet akin to a demat account for crypto trade.

El Salvador, earlier this year, launched a national crypto wallet called El Chivo. However, unlike India’s plan, the wallet was launched to help the adoption of Bitcoin as legal tender. However, India has no plans to do so. The Indian Finance Minister, Sitharaman has already clarified in the Parliament that India has no plans of granting Bitcoin to the status of currency.

That being said, El Chivo solves the same problem that India is looking at — the creation of a closed-loop system where crypto transactions can only occur within the designated system. One Chivo Wallet user can transfer funds to another Chivo Wallet, but cannot transfer them to an external wallet.

While this may be an attractive proposition for the government, proponents of the crypto universe argue that this goes against the objective of interoperability, which may limit growth.

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