India’s regulators haven’t gone public on banning bitcoin and other cryptocurrencies, but there’s widespread speculation that the government plans to outlaw all private virtual currencies and launch its own official digital currency.
The proposed bill would ban trading, mining, and even holding cryptocurrencies, Reuters reported.
If India does pass such a law, it will be the first major economy to make crypto possession illegal. Even China, which has banned mining and trading, does not penalize possession.
The legal status of cryptocurrency has been controversial for several years. In 2018, India’s central bank banned Indian banks from providing financial services to cryptocurrency exchanges, hampering the growth of the country’s crypto economy.
In 2020, India’s Supreme Court overturned the ban, resulting in a surge of interest in cryptocurrencies. The Bitbns crypto exchange told Reuters that user registrations have risen thirtyfold over the last year, Ars Technica reported.
Discussions on the Indian ban are in their “final stages,” an unnamed government official told Reuters. Crypto owners in India will have six months to sell before the ban goes into effect.
Published in January, India’s agenda for the upcoming legislative session included banning “all private cryptocurrencies” with some exceptions to promote the general use of blockchain technology.
“We are not shutting all options off. We will allow a window for people to use (crypto) so that experiments in the blockchain, bitcoin … and fintech that depend on such experiments will have that window available,” said Indian Finance Minister Nirmala Sitharaman during an interview on India Today Conclave. “They’re not going to shut it off all. Not yet.”
A 2019 government panel recommended a jail sentence of up to 10 years for crypto-related offenses, according to The Verge.
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India can’t actually ban crypto for technical, social, and political reasons, according to Balaji S. Srinivasan, former CTO of Coinbase and general partner at Andreessen Horowitz.
“The proponents of a ban think it could help Indian national security, but would find that a crypto ban simply shuts down well-lit, regulated exchanges in favor of underground crypto, and causes trillions in collateral damage to boot,” Srinivasan wrote in a Feb. 16 blog. “Bad actors would not obey a ban, people with the means to do so would move themselves or their money abroad, and hundreds of millions of ordinary Indians would suffer compounding economic losses for every year they are firewalled from this new financial internet.”
