Chris Ratcliffe | Bloomberg | Getty Images
India will propose a law banning cryptocurrencies, fining anyone who trades in the country or even holds such digital assets, a senior government official told Reuters, with a potential blow to millions of investors in the hot asset class.
The bill, one of the world’s strictest policies against cryptocurrencies, would criminalize the possession, issuance, extraction, trading and transfer of cryptocurrencies, said the official, who has direct knowledge of the plan.
The move is in line with a January government agenda calling for a ban on private virtual currencies, such as bitcoin, while building a framework for an official digital currency. But recent government comments have raised investors’ hopes that the authorities could move more easily into the booming market.
Instead, the bill would give cryptocurrency holders up to six months to liquidate, after which penalties will be charged, said the official, who asked not to be named because the content of the bill is not public.
Officials are confident the law will be passed, as Prime Minister Narendra Modi’s government has a comfortable majority in parliament.
If the ban becomes law, India would be the first major economy to make cryptocurrency illegal. Even China, which has banned exploitation and trade, does not penalize possession.
The Ministry of Finance did not immediately respond to an e-mail requesting comments.
“Greed” over “Panic”
Bitcoin, the world’s largest cryptocurrency, hit a record $ 60,000 on Saturday, nearly doubling in value this year as acceptance for payments has grown with the support of supporters such as Ella Musk, Tesla’s CEO.
In India, despite government threats of a ban, transaction volumes are rising and 8 million investors now own 100 billion rupees ($ 1.4 billion) in crypto-investments, according to industry estimates. No official data available.
“Money is growing fast every month and you don’t want to stay on the sidelines,” said Sumnesh Salodkar, a crypto-investor. “Even if people are panicking because of the potential ban, greed leads to this election.”
User registrations and cash flows at local cryptocurrencies are 30 times higher than a year ago, said Gaurav Dahake, its chief executive. Unocoin, one of India’s oldest stock exchanges, added 20,000 users in January and February, despite concerns about the ban.
ZebPay “made as much volume per day in February 2021 as we did in February 2020,” said Vikram Rangala, the exchange’s marketing director.
India’s top officials have called the cryptocurrency a “Ponzi scheme”, but Finance Minister Nirmala Sitharaman has allayed some investor concerns this month.
“I can only give you this hint that we are not closing our minds, we are looking for ways in which experiments can happen in the digital world and in cryptocurrency,” she told CNBC-TV18. “A very calibrated position will be taken.”
But the official told Reuters that the plan is to ban private cryptographic assets, while promoting blockchain – a secure database technology that is the backbone for virtual currencies, but also a system that experts say could revolutionize international transactions. .
“We have no problem with technology. There is no harm in exploiting the technology,” the official said, adding that the government’s moves will be “calibrated” to the extent that those who did not liquidate cryptographic assets during the grace period will be penalized. laws.
Prison conditions?
In 2019, a government group recommended up to 10 years in prison for people who exploit, generate, hold, sell, transfer, dispose of, issue or trade in cryptocurrencies.
The official declined to say whether the new bill includes prison sentences as well as fines or provide further details, but said talks are in their final stages.
In March 2020, India’s Supreme Court rejected a 2018 central bank order banning banks from trading in cryptocurrencies, prompting investors to cram into the market. The court ordered the government to take a position and draft a law to that effect.
The Reserve Bank of India again expressed concern last month, citing what it said were risks to financial stability due to cryptocurrencies. At the same time, the central bank is working on launching its own digital currency, a step that the government’s bill will also encourage, the official said.
Despite the euphoria of the market, investors are aware that the boom could be in jeopardy.
“If the ban is official, we have to comply,” Naimish Sanghvi, who has been betting on digital currencies for the past year, told Reuters, referring to concerns about a potential ban. “Until then, I’d rather stack and run the market than panic and sell.”