India plans cryptocurrency ban, will penalize miners and traders

India will propose a law banning cryptocurrencies, fining anyone who trades in the country or even owns such digital assets, a senior government official told Reuters in a potential blow to millions of investors cramming in the scorching asset class.

The bill, one of the world’s toughest policies against cryptocurrencies, would criminalize the possession, issuance, mining, trading and transfer of cryptoassets, said the official, who has direct knowledge of the plan.

The measure is in line with a January government program that called for a ban on private virtual currencies such as bitcoin while creating a framework for an official digital currency. But recent government comments had raised investors’ hopes that authorities could more easily enter the booming market.

Instead, the bill would give cryptocurrency holders up to six months to liquidate, after which penalties will be imposed, said the official, who asked not to be named because of the contents of the bill. law is not public.

Officials are confident the bill will be enacted as Prime Minister Narendra Modi’s government holds a comfortable majority in parliament.

If the ban became law, India would be the first major economy to make the holding of cryptocurrency illegal. Even China, which has banned mining and trading, doesn’t penalize possession.

The finance ministry did not immediately respond to an email seeking comment.

Bitcoin, the world’s largest cryptocurrency, hit a record high of $ 60,000 on Saturday, nearly doubling in value this year as its payment acceptance increased with the backing of backers as prestigious as Tesla CEO Elon Musk. .

In India, despite threats of a ban from the government, transaction volumes are increasing and 8 million investors now hold 100 billion rupees ($ 1.4 billion) in crypto-investments, according to industry estimates. No official data is available.

“Money is multiplying rapidly every month and you don’t want to stay away,” said Sumnesh Salodkar, a crypto-investor. “Even though people are panicking over the potential ban, greed drives these choices.”

User registrations and money inflows on local cryptocurrency exchange Bitbns have increased 30-fold from a year ago, said Gaurav Dahake, its chief executive. Unocoin, one of India’s oldest exchanges, added 20,000 users in January and February, despite fears of a ban.

ZebPay “made as much volume per day in February 2021 as we did in February 2020,” said Vikram Rangala, director of marketing for the exchange.

Senior Indian officials have called the cryptocurrency a “Ponzi scheme,” but Finance Minister Nirmala Sitharaman eased some investor concerns this month.

“I can only give you this clue that we are not closing our minds, we are looking for ways in which experiments can take place in the digital world and cryptocurrency,” she told CNBC-TV18. “There will be a very calibrated position taken.”

The senior official, however, told Reuters that the plan was to ban private crypto-assets while promoting blockchain – a secure database technology that is the backbone of virtual currencies, but also a system that, according to experts, could revolutionize international transactions.

“We don’t have a problem with the technology. There is nothing wrong with exploiting the technology,” the official said, adding that the government’s measures would be “calibrated” within the scope of sanctions imposed on those who failed to liquidate cryptoassets within the law’s grace period.

A government panel in 2019 recommended a jail term of up to 10 years for people who mine, generate, hold, sell, transfer, dispose of, issue or trade cryptocurrencies.

The official declined to say whether the new bill includes jail terms as well as fines, or to provide more details, but said discussions were in their final stages.

In March 2020, the Indian Supreme Court overturned a 2018 central bank order banning banks from trading cryptocurrencies, prompting investors to pile up in the market. The court ordered the government to take a stand and draft legislation on the issue.

The Reserve Bank of India reiterated its concern last month, citing what it called risks to the financial stability of cryptocurrencies. At the same time, the central bank is working on launching its own digital currency, a step the government bill will also encourage, the official said.

Despite the market euphoria, investors are aware that the boom could be in jeopardy.

“If the ban is official, we have to comply,” Naimish Sanghvi, who started betting on digital currencies last year, told Reuters, referring to existing concerns about a possible ban. “Until then, I’d rather stack up and run with the market than panic and sell.”