According to a senior government official familiar with the situation, the Indian government is working on legislation that will see private ownership of cryptocurrencies criminalized.
India’s Crypto Ban Is Still On Course
In a Reuters report published on Monday, an unnamed government official said the legislation banning cryptocurrencies in the country is in its final stages. According to the report, this will see the possession, issuance, mining, holding, and digital assets swap criminalized.
While India seeks to criminalize crypto ownership, the government official said that the government does not have any issues with blockchain technology, the technology behind Bitcoin. He said fines would be imposed and not jail terms in speaking on how the government plans to dissuade private crypto ownership this time around. A 2019 proposed ban had recommended jail terms of up to 10 years for private crypto holders.
The proposed legislation is hugely supported by the Reserve Bank of India (RBI) its apex bank. The RBI had imposed a blanket ban in 2018 on cryptocurrencies in the country, making it unlawful to issue, mine, hold, and exchange digital assets for other asset classes. The central bank had cited financial instability occasioned by the volatile digital assets as a reason for the decision.
A Supreme Court ruling overturned the embargo in March 2020, leading to massive crypto adoption. The court asked the financial governing body to provide regulatory goalposts in the crypto space.
The RBI promised to continue its fight against what many in the government considered a “Ponzi scheme” and made another attempt last month, saying the volatile nature of digital assets could pose a risk to investor funds.
According to the financial body, cryptocurrencies like Bitcoin were a bubble and could affect market sentiments leading investors to invest large portions of their capital. A fall in value could see many financial markets sliding into depression and harming the country’s already fragile economy. The RBI is currently exploring blockchain technology to issue a state-backed digital currency (digital rupee) to combat the rise of cryptocurrencies.
Finance Chief Taking A “Calibrated” Position
But, a contrary view has been aired by the Minister of Finance and Corporate Affairs Nirmala Sitharaman. According to the 61-year-old technocrat, the government is taking a more considerate outlook. Sitharaman made this comment in a separate event saying the government is looking at how experiments can happen in the digital world and cryptocurrency. These experiments would invariably lead the government to take a “calibrated” position on the issue.
Sitharaman further stated that the Finance Ministry would allow a certain amount of “window” for people to experiment with blockchain and Bitcoin as they will not be shutting off all options.
Even though the RBI is under the Ministry of Finance jurisdiction, operates independently from the government body due to how the Indian financial system is structured. The Reserve Bank of India caters to economic activities like monetary policies, issuing the national currency- the Rupee, and regulating the entire Indian banking system.
The Ministry of Finance focuses on macroeconomic policies, public financing, inflation, and the stock markets’ supervision. Their disparate outlook on economic issues has seen disputes erupt between the two Indian finance arms.
Crypto holders may likely be caught up in a show of strength between the RBI and the Finance Ministry, but many investors are still trooping in despite the proposed ban.
The government has said crypto investors would be given a six-month grace period to liquidate their crypto assets before penalties are exerted. But still, crypto exchanges are seeing traffic into the space growing by the day.
With Bitcoin breaking through a new ATH of $60,000 on Saturday, tripling its market value from 2017 after being backed by several institutions, the Indian crypto markets have grown astronomically. Since documented, a daily transaction volume showed 8 million investors holding 100 billion rupees (about $1.4 billion) in crypto investments.
Unocoin, India’s oldest crypto exchange, said 20,000 new investors came on board in January and February despite growing concerns about the ban being enforced.