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India’s government has introduced a bill that would ban private cryptocurrencies, but much remains up in the air as to what a prohibition would entail. News broke in late January that the government plans to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. Among other things, the law provides a framework for the creation of a digital currency to be issued by the Reserve Bank of India.

It is unclear what the bill’s chances of passing are. The bill itself is also ambiguous. For example, the bill seeks to prohibit all private cryptocurrencies in India, but “allows for exceptions to promote the underlying technology of cryptocurrency and its uses,” according to a document issued by Lok Sabha, India’s parliament. “Private” could mean any digital currency that is not sovereign.

India has taken strong stances against cryptocurrencies in recent years, but the market continues to grow. In 2018, a government panel recommended banning all private cryptocurrencies, proposing a 10-year prison term for violators. That same year, India’s monetary policy regulator banned crypto transactions after a spate of fraudulent activity, but the rule was reversed by India’s Supreme Court in 2020.

LEGAL TOKENS

It may be too late to put the “crypto genie” back in the bottle. Bitcoin has already created significant wealth for some Indians, and declaring a total ban on all cryptocurrencies not issued by the Indian government could create a significant political backlash. A possible middle ground could be a restriction on the use of cryptocurrencies for certain transactions, including illegal activities. Perhaps most importantly, India’s bill offers a path for the government to establish its own digital currency, something which many countries are considering.

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Author's Assets

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Anthony Tu-Sekine | Partner

As the head of Seward & Kissel’s Blockchain and Cryptocurrency Group and a frequent commentator on all things crypto, Anthony advises clients on a wide range of evolving topics, including how to structure and issue security and utility tokens, registered and unregistered offerings of security tokens, token custody, transfer and liquidity issues, non-security opinions, and investments in crypto assets by funds and other investors. A recognized leader on physical precious metals funds, Anthony represented APMEX Inc. and alternative asset manager Sprott Inc. in connection with the launch of OneGold.com, which allows investors to own gold documented on blockchain. He also:

  • Represents ShelterZoom, a leading blockchain-based SaaS contract management platform;

  • Helped form a tokenized hedge fund;

  • Provides advice in connection with ransomware payments made in cryptocurrencies; and

  • Worked with sponsors of bitcoin ETF and OTC products.

“You can work with regulators or you can really try to piss them off… If you really want to do the latter, then you should expect that they will bring every tool they have against you.”

Anthony’s thoughts on BitMEX indictment, as published in Law360 article “BitMEX Case Seen as Blessing in Disguise for Crypto Sector”

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Casey Jennings | Associate

A member of Seward & Kissel’s Financial Services Regulatory Group and Blockchain and Cryptocurrency Group, Casey advises financial services companies – including banks, broker-dealers, investment funds, service providers, and financial technology companies – on federal and state banking and securities law issues and the structuring of new financial products, including anti-money laundering, deposit issues, token offerings, custody of traditional and crypto assets, transfer and liquidity issues, Volcker Rule issues, and investments in crypto assets by funds and other investors. Before joining the firm, Casey served as counsel to the Consumer Financial Protection Bureau, where he developed and implemented financial regulatory policy, including the first CFPB rulemaking to rely on unfair, deceptive, and abusive acts and practices (UDAAPs) authority. Since then, he has:

  • Represented e-retailer APMEX Inc. and alternative asset manager Sprott Inc. in connection with the launch of the online marketplace, OneGold.com.

“The whole notion of crypto is that there are no gatekeepers and the BSA requires that there be gatekeepers. Those two notions are very much at odds with one another. But the BSA is the best system that we’ve got right now.”

Casey’s perspective on crypto AML regulations as published in Cointelegraph article “How U.S. authorities are using old AML tools to crack down on crypto”