By Aftab Ahmed and Nupur Anand
NEW DELHI / MUMBAI (Reuters) – India will propose a law banning cryptocurrencies, fining anyone who trades in the country or even owns these digital assets, a senior government official told Reuters in a potential blow to millions of investors who pile up in active high class.
The bill, one of the world’s strictest policies against cryptocurrencies, criminalizes the possession, issuance, mining, trading and transfer of crypto assets, said the official, who has direct knowledge of the plan.
The move is in line with the government’s January agenda, which called for a ban on virtual private currencies such as bitcoin, while creating a framework for an official digital currency. But recent government comments have raised investors’ hopes that the authorities could slow down in the booming market.
Instead, the bill would give cryptocurrency holders up to six months to settle, after which penalties will be applied, said the official, who asked not to be named because the content of the bill is not public.
Authorities are confident that the bill will pass, as Prime Minister Narendra Modi’s government holds a comfortable majority in parliament.
If the ban becomes law, India will be the first major economy to make the retention of cryptocurrencies illegal. Even China, which has banned mining and trade, does not penalize possession.
The Ministry of Finance did not immediately respond to an email asking for comment.
‘GREED’ ABOUT ‘PANIC’
Bitcoin, the world’s largest cryptocurrency, hit a record high of $ 60,000 on Saturday, almost doubling in value this year as its acceptance for payments has increased with the support of high-profile sponsors like Tesla Inc CEO Elon Musk.
In India, despite government threats to ban it, the volume of transactions is growing and 8 million investors now hold 100 billion rupees ($ 1.4 billion) in cryptographic investments, according to industry estimates. No official data is available.
“The money is multiplying rapidly every month and you don’t want to sit still,” said Sumnesh Salodkar, a crypto-investor. “Even though people are panicking about the potential ban, greed is driving these choices.”
User registrations and cash inflows into local encryption Bitbns have increased 30-fold from the previous year, said Gaurav Dahake, its chief executive. Unocoin, one of India’s oldest exchanges, added 20,000 users in January and February, despite concerns over a ban.
ZebPay “made as much volume per day in February 2021 as we did throughout February 2020,” said Vikram Rangala, director of marketing for the exchange.
Senior Indian officials called the cryptocurrency a “Ponzi scheme”, but Finance Minister Nirmala Sitharaman has eased some investor concerns this month.
“I can only give you a clue 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. “There will be a very calibrated position taken.”
The senior official told Reuters, however, that the plan is to ban private crypto-assets while promoting blockchain – a secure database technology that is the backbone of virtual currencies, but also a system that experts say can revolutionize international transactions.
“We have no problems with technology. There is no harm in taking advantage of the technology,” said the official, adding that the government’s measures would be “calibrated” to the extent of penalties for those who do not settle crypto assets within the grace period of the law.
JAIL’S TERMS?
A 2019 government panel recommended imprisonment of up to 10 years for people who exploit, generate, maintain, sell, transfer, discard, issue or trade cryptocurrencies.
The official declined to say whether the new bill includes prison sentences in addition to fines, or offers more details, but said the discussions were in their final stages.
In March 2020, the Supreme Court of India overturned a 2018 order from the central bank banning banks from trading in cryptocurrencies, prompting investors to pile up on the market. The court ordered the government to take a stand and draft a law on the matter.
The Reserve Bank of India voiced its concern again last month, citing what it said were risks to the financial stability of cryptocurrencies. At the same time, the central bank has been 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 may be in danger.
“If the ban is official, we have to obey it,” said Naimish Sanghvi, who started betting on digital currencies last year, referring to existing concerns about a possible ban. “Until then, I’d rather stack and run with the market than panic and sell.”
(Reporting by Aftab Ahmed and Nupur Anand; Editing by Euan Rocha and William Mallard)