In a move that has led to panic selling among local crypto investors, the Indian parliament announced on Nov. 23 that it is deliberating a bill that seeks to “prohibit all private cryptocurrencies in India” to pave the way for a single official digital currency to be issued by the government.
Cryptocurrency is massively popular in India. It hosts a roughly estimated 20 million crypto investors with holdings of around $5.38 billion (400 billion Indian rupees), according to a report by Reuters. There is no official data on local crypto holdings or database of users.
According to a statement from India’s lower house of parliament, the bill aims to “create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India.” Only private digital currencies that “promote the underlying technology of cryptocurrency and its uses” will be exempted from the ban, the statement continued, without detailing exactly which private cryptocurrencies would be spared.
The bill will be taken up in a parliamentary session scheduled for next week.
Following the announcement, the prices of cryptocurrencies in the country saw major declines. Bitcoin fell by 18.53 percent, Tether by 18.29 percent, and Ethereum by 15.58 percent based on data from local crypto exchange CoinSwitch Kuber. However, global cryptocurrency prices remain largely unaffected by the Indian parliament’s proposed ban.
The statement comes in the wake of Prime Minister Narendra Modi’s speech at the Sydney Dialogue last Thursday in which he said it was important to ensure that digital currencies are not used in an unlawful manner that “can spoil the nation’s youth.” He also spoke of the need for a united front of regulation among democratic nations to prevent private digital currencies falling into the “wrong hands.”
The country’s Reserve Bank has also expressed its concerns about the use of private digital assets. "Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint," the central bank chief Shaktikanta Das said at a recent event.
Last week, a parliamentary standing committee on finance conducted a meeting with crypto industry leaders and reportedly reached an agreement that while the tide of digital currencies cannot be stopped, it will require regulation.
In April of 2018, the Reserve Bank prohibited regulated banks from facilitating cryptocurrency transactions after a series of virtual fraud cases were reported. The Supreme Court overturned the decision in 2020.
Experts believe that traders’ frenzied reactions are preliminary. “I don’t believe there will be an outright ban, because the standing committee asked interesting and informed questions, and I believe that they have figured out that banning is not a good option,” Sidharth Sogani, CEO of cryptocurrency research foundation CREBACO, told VICE World News.
“I am expecting strict regulations for the exchanges and other industry participants,” he added. “For the retail users, I believe there is nothing to panic about. Even if there is a worst-case scenario and there is a ban, there won’t be something that happens overnight.”
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