Exclusive: India Proposes 10-Year Jail For Cryptocurrency Use,
May Introduce Its Own Digital Currency
By Nikunj Ohri • June 7, 2019
India has proposed a jail term of one to 10 years for those who mine, hold or sell
cryptocurrencies, a move that will double down on restrictions already placed by the
Reserve Bank of India on cryptocurrencies.
The government will also propose the introduction of an official ‘Digital Rupee’ in
consultation with the central board of the Reserve Bank of India, according to the draft
Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, which
was accessed by BloombergQuint.
The draft bill has been recommended by a panel headed by Economic Affairs Secretary
Subhash Chandra Garg and comprises members from the central bank, Securities and
Exchange Board of India, Central Board of Direct Taxes, investigative agencies, among
others. The findings of the panel haven’t been made public yet.
The Bill proposes a penalty—which may be prescribed by the central government—along
with a jail term of up to 10 years, for those who “mine, generate, hold, sell, transfer,
dispose, issue or deal in cryptocurrencies directly or indirectly”. Offences such as these
would be “cognisable and non-bailable”, according to the draft bill.
“If any conduct is punishable under any other law, this Act will be in addition to, and not in
derogation of such law,” it said.
The court, according to the draft bill, shall decide the appropriate prison sentence and a
fine for an offence by:
Culpability of the accused.
Actual and intended gain made and loss caused.
Repetitive nature of offence.
Harm caused to the system.
The penalty imposed on the accused, according to the bill, shall be either thrice the loss
caused to the system or three-fold the gains made by him/her, whichever is higher. If the
loss or gain can't be reasonably determined, the maximum fine that can be imposed may
be notified by the government.
The draft bill also states that if a violation under the Act is done by a corporate body, the
director, members of managing committee, chief executive officer, manager, among other
executives, will be held liable. It also seeks to protect action taken by central government
officers in “good faith” under the Act from legal proceedings.
Transition
A person holding cryptocurrency, will have to declare and dispose it within 90 days from
the date of commencement of the Act, as per the draft bill, in accordance with the
prescription of central government.
The draft bill proposes to amend the Prevention of Money Laundering Act, 2002, to
include under its purview transactions like mining, holding, generating, selling, transfer
and disposal of cryptocurrency.
It seeks to have an appropriate regulator under the Act that will have representatives from
Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and
Development Authority, RBI, SEBI, and any other regulator notified by the central
government.
Digital Rupee
The central government may approve digital rupee to be a legal tender, in consultation
with the RBI’s central board. The digital rupee would be governed by regulations that will
be notified by the central bank under relevant provisions of RBI Act, 1934, the draft bill
said.
The draft bill also grants power to the RBI to notify any official foreign digital currency to
be recognised as a foreign currency in India. Such recognised currencies will be governed
by regulations notified by the RBI under relevant provisions of the Foreign Exchange
Management Act, 1999.
However, Agustín Carstens, general manager, Bank of International Settlements, had
recently said costs associated with moving to a digital currency may not be worthwhile for
central banks, if there’s no “social need”.
“If you compare what a central bank digital currency can give you and if you compare
what you have today in a two-tier system, where the central banks provide an important
infrastructure and on top of that you have applications provided by third parties, you can
get a very competitive payment system,” Carstens had said in Mumbai in April.