India is on track to ban all but a few private cryptocurrencies after the government announced Tuesday the upcoming introduction of a new financial regulation bill. Indian crypto exchanges have already suffered panic selling over crypto bill confusion.
The Cryptocurrency and Regulation of Official Digital Currency bill will create a facilitative framework for an official digital currency to be issued by the Reserve Bank of India and ban all private cryptocurrencies, Euronews reported.
Such a pre-verification approach would create obstacles for thousands of peer-to-peer currencies that thrive on being outside the ambit of regulatory scrutiny. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its usage.
The government’s objective is “to create a facilitative framework for creating the official digital currency to be issued by the Reserve Bank of India.”
The same bill has previously appeared on the Indian parliament’s agenda but has not led to a government vote on legislation that addresses digital assets. However, in March 2020, India’s supreme court overturned a blanket ban on crypto imposed by the central bank two years ago. Since that time, reports from many media outlets and statements from officials suggest that the Indian government is considering different solutions to regulate digital assets.
Heavy selling on Indian crypto exchanges followed reports about the crypto banning bill. However, the market sell-off has cooled down a bit after sources familiar with the matter told local news publication News18 that the regulation won’t be an outright ban.
“A regulation mechanism will be in place so that crypto is not misused. The government is concerned about the underground transactions happening against cryptocurrency — particularly its role in ‘hawala’ and terror funding,” the sources said.
They also added that digital assets won’t be recognized as currencies: “A strict mechanism will be in place so that law enforcement agencies can trace the origin of cryptocurrency used for illegal or anti-national work.”
Also, Cashaa CEO Kumar Gaurav told Cointelegraph the legislation was likely more of an attempt to prevent illicit activities in the industry rather than outright ban crypto.
Earlier this month, Indian Prime Minister Narendra Modi said his first public comment on the subject that all democratic nations must work together to ensure cryptocurrency “does not end up in wrong hands, which can spoil our youth.”
Also, The Reserve Bank of India (RIB) has voiced “serious concerns” about private crypto and announced the launch of its own central bank digital currency (CBDC) by December. As the senior government official told Reuters, the plan is to ban private crypto-assets ultimately while paving the way for a new CBDC.
Earlier this year, the Indian government considered criminalizing crypto assets’ possession, issuance, mining, trading, and transference.
No official data is available, but industry estimates suggest there are 15-20 million crypto investors in India, with total crypto holdings of around 400 billion rupees ($5.35 billion).