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India reportedly weighs ban of digital currency transactions

By Munikoti Rochan

15:38, 17 November 2021

Bitcoin logo
Bitcoin logo - Photo: Shutterstock

A draft law, being finalised by the Indian government, will reportedly seek to outlaw payments made in cryptocurrencies. However, the legislation may allow investors to buy and sell digital assets, akin to trading in stocks or bonds.

New Dehli proposes to present a crypto regulation bill in parliament soon. In the bill, the administraton may also prohibit crypto firms and digital exchanges from actively soliciting customers residing in the sub-continent, as per a report published in The Economic Times.

India’s markets watchdog, the Securities and Exchange Board of India (SEBI), may possibly be appointed the crypto regulator, the newspaper said. Among other things, the new law may well impose a tax on digital currencies.

RBI Governor Das reiterates his opposition

Last week, Reserve Bank of India (RBI) Governor Shaktikanta Das reiterated his position against allowing cryptocurrencies, saying they pose a serious threat to any financial system because they are not regulated by central banks.

“…as the central banker, we have serious concerns about it and we have flagged it many times," Das told an event on 11 November, according to a Press Trust of India report published in The Hindu.

Das also questioned media reports that insist a large number of Indians are trading in digital currencies. “I am not sure about the veracity of these numbers…But I still think the number of investors look clearly exaggerated as bulk of them, say over 70% have invested only about INR1,000 ($13.45) each in cryptocurrencies.”

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What about central bank digital currencies?

Meanwhile, the RBI had announced its intent to roll out an official virtual currency.

The Indian central bank “is currently working towards a phased implementation strategy and examining use cases which could be implemented with little or no disruption,” RBI deputy governor T Rabi Sankar said at at event in late July.

Issues under consideration include:

  • The scope of central bank digital currencies – whether they should be used in retail payments or also in wholesale payments;
  • The underlying technology – whether digital currencies should be a distributed ledger or a centralised ledger, for instance, and whether the choice of technology should vary according to use cases;
  • The validation mechanism – whether token based or account based,
  • The distribution architecture – whether direct issuance by the RBI or through banks;
  • The degree of anonymity etc.

“However, conducting pilots in wholesale and retail segments may be a possibility in (the) near future,” Sankar said.

He added, implementing a digital currency may require an enabling legal framework because existing regulations were made with paper currency in mind.

Read more: Indian shares drop a second day in a row

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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