Economist Sharad Kohli welcomed the government's decision to introduce the Cryptocurrency Bill in the upcoming winter session of Parliament, stating that this was a much-awaited decision as there is no institution to regulate the movement of the digital currency.
Kohli said, "I think is a much-awaited bill. Over 4,000 digital currencies floating in the economy and more than 10 crore people, especially youngsters between the age group of 21 and 35 have invested their hard-earned without knowing the consequences of it. The total amount of investment in cryptocurrency is stated to be around 60,000 to 70,000 crore. It has no fundamentals, the movement in currency prices is driven by news."
Speaking about the features of cryptocurrency, the economist said, "Cryptocurrency is minted through mining and involves mathematical algorithm. The moment the formula matches in the process of mining, a coin comes out. Other than that there are no fundamentals attached to cryptocurrency. So, it can crash anytime. We have seen people's money getting doubled. I have seen in my lifetime, a three dollar bitcoin which is 150 rupees, that time dollar used to be 50 rupees and today the same Bitcoin is worth Rs 50 lakh. That is the stupendous rise and overnight it crashes 10 per cent, 5 per cent, 7 per cent. That is normal for a cryptocurrency."
He further said that digital currency cannot be used for legal tender because the RBI controls monetary policy in the country.
"No central bank would allow a parallel currency to become a legal tender," he added.
Kohli further said that the government might come up with its own virtual currency and plan to create the Central Bank for Digital Currency (CBDC).
"The government is working on these aspects. The coins become history and will be replaced by digital currency. The technology is good and I think the government is using the technology to create its own virtual currency," said the economist.
He said the regulation of cryptocurrency is necessary it is being used for illegitimate purposes like terror funding.
The government would introduce a bill to ban all private cryptocurrencies in India while providing certain exceptions to promote the underlying technology of cryptocurrency.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021' is among 26 new bills on the agenda of the government for the winter session of parliament beginning November 29.
The bill seeks to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India.
While seeking to prohibit all private cryptocurrencies in India, the bill "allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses".
Prime Minister Narendra Modi had earlier this month chaired a meeting on the way forward for cryptocurrency and related issues.