The Indian Government, through the country’s parliament, has disclosed that it would be introducing a bill to ban private cryptocurrencies and create a framework for a central bank-backed digital money.
It explained that the proposed bill would “seeks to prohibit all private cryptocurrencies in India” and also lay out necessary sanction for anyone that engages in it dealing after the ban become effective.
As gathered, the parliament’s move was coming after Prime Minister Narendra Modi warned last week that Bitcoin presents a risk to younger generations and could “spoil our youth” if it ends up “in the wrong hands”.
The bill is the latest such move by a major emerging economy, after China declared all cryptocurrency transactions illegal in September. India’s crypto market has boomed since the country’s Supreme Court overturned a previous ban in April last year, growing more than 600 percent over the past year according to research by Chainalysis.
Between 15 and 100 million people in Asia’s third-largest economy are estimated to own cryptocurrencies, with total holdings in the billions of dollars. Their investments will now face an uncertain future.
India’s central bank announced in June that it was working to introduce its own digital currency by the end of the year, while warning it has “serious concerns” about private cryptocurrencies like Bitcoin, Ethereum and others.
The bill, to come before the new legislative session, would allow for some exceptions to promote cryptocurrency technology, according to parliament’s bulletin of upcoming business, but no further details about the proposed legislation were released.
The market price of Bitcoin appeared unaffected and was up 1.67 percent in Tuesday’s trade. But the phrasing of the proposed bill sent alarm bells ringing among local traders and enthusiasts.
Reacting to the parliament’s move, the founder of crypto-education platform Bitinning, Kashif Raza, said that the industry expected the government to take a more favourable view after recent consultations with the industry, adding that “the wording has created a panic,” said, adding that .
“Obviously there will be a shutter-down on the industry,” he added. “The industry will die in its natural way. Intellectual capital will move away, investors will face losses.”
Cryptocurrencies have been under scrutiny by Indian regulators since first entering the local market in 2013. A surge in fraudulent crypto transactions following the Modi government’s demonetisation of nearly all banknotes in 2016 led to the country’s central bank banning crypto transactions in April 2018.
The Supreme Court lifted the ban two years later and investments have surged in the time since. Indians have been bombarded in recent months with advertisements for CoinSwitchKuber, CoinDCX and other home-grown crypto exchanges across television channels, online streaming services and social media.
These platforms spent more than 500 million rupees ($6.7 million) on advertising spots during the recently concluded T20 cricket World Cup, research by TAM Sports showed, with viewers subjected to an average of 51 cryptocurrency advertisements per match.
Analysts argued that regulation would be central to addressing security risks, with crypto exchanges increasingly targeted by cyber criminals as virtual currency prices soar.