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India contemplates all-out ban on cryptocurrencies
India’s Prime Minister Narendra Modi. Source: Shutterstock/Madhuram Paliwal.
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  • India will propose a law banning cryptocurrencies, penalising traders and even those in possession of the digital assets
  • The bill would criminalise the possession, issuance, mining, trading and transfer of digital currencies
  • It's in line with a government agenda proposed in January, which called for a ban on private virtual currencies while a framework is built for an official digital currency through the Reserve Bank of India
  • Should the bill pass, cryptocurrency holders will have six months to liquidate their assets
  • Despite recent threats of a ban, transaction volumes have soared and roughly eight million investors now hold around 100 billion rupees (approximately A$1.77 billion) in crypto-investments
  • In 2019, a government panel recommended jail terms of up to 10 years for those who mine, generate, hold, sell, transfer, dispose of, issue or deal in cryptocurrencies
  • But it's not known whether or not the new bill includes jail terms on top of the anticipated fines

India will propose a law banning cryptocurrencies, penalising traders and even those in possession of the digital assets, according to a senior government official.

As one of the strictest policies against cryptocurrencies, the bill would criminalise the possession, issuance, mining, trading and transfer of digital currencies, representing a significant blow to the millions of investors piling into the trending asset class.

It's in line with a government agenda proposed in January, which called for a ban on private virtual currencies while a framework is built for an official digital currency through the Reserve Bank of India.

Should the ban become law, India will become the first major economy to make holding cryptocurrencies illegal. Even China, which has banned mining and trading, does not penalise possession.

In such a case, holders of cryptocurrencies will be given six months to liquidate, after which penalties will be levied.

It looks likely, too, since Prime Minister Narendra Modi's government holds a comfortable majority in parliament.

However, despite recent threats of a ban, transaction volumes have soared and roughly eight million investors now hold around 100 billion rupees (approximately A$1.77 billion) in crypto-investments.

"The money is multiplying rapidly every month and you don't want to be sitting on the sidelines," said Sumnesh Salodkar, a crypto-investor. "Even though people are panicking due to the potential ban, greed is driving these choices."

User registrations and money inflows at local crypto-exchange Bitbns are up 30-fold from a year ago, while Unocoin, one of India's oldest exchanges, added 20,000 users in January and February.

ZebPay "did as much volume per day in February 2021 as we did in all of February 2020," said Vikram Rangala, the exchange's chief marketing officer.

India's top officials have called cryptocurrency a "Ponzi scheme", but Finance Minister Nirmala Sitharaman this month eased some investor concerns.

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

In 2019, a government panel recommended jail terms of up to 10 years for those who mine, generate, hold, sell, transfer, dispose of, issue or deal in cryptocurrencies.

However, it's not known whether or not the new bill includes such penalties on top of the anticipated fines.

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