Despite the wider acceptance and soaring market value of the digital assets, India is proposing a law to ban cryptocurrencies, to impose a penalty for trading or holding such crypto-assets in the country, according to a senior government official.
The bill once came into effect will be one of the world’s strictest policies against digital assets which would criminalize the possession, issuance, mining, trading and transferring of cryptocurrencies, stated the official, who has direct knowledge of the plan.
The new measures are following the government’s agenda that proposed banning private virtual currencies like bitcoin while creating a framework for an official digital currency. But, the bill would give holders of cryptocurrencies up to six months to liquidate, after which penalties will be imposed, said the official.
If the bill comes into effect, then India would be the first major economy to make holding cryptocurrency illegal. Even China, which has banned mining and trading, does not penalize possession.
Surging crypto transactions
According to industry estimates, in India, despite government threats of a ban, transaction volumes of digital assets are swelling and 8 million investors now hold $1.4 billion in crypto-investments.
“The money is multiplying rapidly every month and you don’t want to be sitting on the sidelines. Even though people are panicking due to the potential ban, greed is driving these choices,” said Sumnesh Salodkar, a crypto-investor.
User registrations and money inflows at the local crypto-exchange Bitbns have surged up to 30-fold from a year ago. Unocoin, one of India’s oldest exchanges has added 20,000 users within the last two months.
Top Indian officials have called cryptocurrency a “Ponzi scheme”, but India’s Finance Minister Nirmala Sitharaman this month eased some investor concerns. “I can only give you this clue that we are not closing our minds, we are looking at ways in which experiments can happen in the digital world and cryptocurrency. There will be a very calibrated position taken,” she stated.
Even though a ban on private crypto-assets is planned, blockchain will be promoted, a secure database technology that is the backbone for virtual currencies but also a system that experts say could revolutionize international transactions, the senior official added.
Jail of 10 years?
In 2019, a government panel had recommended jail of up to 10 years on people who mine, generate, hold, sell, transfer, dispose, issue or deal in cryptocurrencies. But the official refused to reveal if the new bill includes jail terms as well as fines.
Last year, the Supreme Court of India struck down a 2018 order by the central bank restricting banks from dealing in cryptocurrencies. The court had also ordered the government to take a stance and draft a law on the matter.
The Reserve Bank of India expressed its concern again last month, citing what it said were risks to financial stability from cryptocurrencies. At the same time, the central bank has been working on launching its own digital currency, a step the government’s bill will also encourage, said the official.
Despite the market euphoria, investors are aware that the boom could be in danger. Last week, Bitcoin, the world’s most valuable cryptocurrency hit a record high of $60,000, nearly doubling in value this year as its acceptance for payments has increased with support from such high-profile backers as Tesla CEO, Elon Musk.