India is proposing to enact a new measure to restrict private cryptocurrencies like bitcoin and set in place a policy for an official virtual currency to be regulated by the central bank, a legislative agenda crafted by the government shows.
The new law will set in motion a framework for the creation of an official cryptocurrency to be issued by the Reserve Bank of India (RBI), the agenda said, published on the lower house website on Friday.
An Indian government committee recommended in 2018 the restriction of all private digital currencies and proposed up to 10 years imprisonment for violators. The committee also suggested that the government explore an electronic version of the fiat currency and methods to enforce it.
At the time, the central bank said the effort was necessary to prevent so-called "ring-fencing" of the nation's financial infrastructure. It had also disputed that Bitcoin and other virtual currencies cannot be considered as currencies as they are not made of metal or exist in physical form.
The proposed measure banning Bitcoin caught off-guard and left confused India's cryptocurrency investors. Given the ruling party has majority control of both houses of Parliament, the legislation's chances of becoming law are good.
The Indian central bank had previously banned bitcoin trading for nearly two years before it was revoked by the Supreme Court in March last year.
Governments around the globe have been studying methods to regulate bitcoin, but no major economy has taken the drastic course of putting a blanket restriction on owning them.
The 2018 notice from the RBI sent panic to multiple local startups and companies that offer services to trade in electronic money. Almost all of them have either since shut down or moved to serve other markets.
This past week, Ray Dalio, who founded and co-chaired Bridgewater Associates – the biggest hedge fund in the world – listed government restriction of digital currency as one of his remaining worries on the cryptocurrency.
"Since the government is looking into introducing the legislation during this session of Parliament, we're sure the government will listen to all the stakeholders before taking any decision," Sumit Gupta, co-founder, and chief executive of CoinDCX, a cryptocurrency exchange in India, said in remarks quoted by TechCrunch.
For his part, Tharman Shanmugaratnam – Singapore's senior minister – said most major financial institutions were examining the crypto space in response to the massive growth of e-commerce and alternative payment companies.
