India is once again poised to crack down on crypto, according to a Bloomberg report.
The government plans to introduce a new law banning cryptocurrency trading, a move that is decidedly out of step with other Asian economies, which have chosen to regulate the nascent financial sector.
The federal cabinet is expected to discuss the bill shortly before it is sent to parliament, according to sources familiar with the matter who who asked not to be identified because they are not authorized to speak to the media.
The federal government will encourage blockchain, the technology underlying cryptocurrencies, but has reservations about crypto trading, according to two of Bloomberg’s unnamed sources.
The Indian central bank banned crypto transactions in 2018 after a spate of frauds in the months following Prime Minister Narendra Modi’s surprise decision to ban 80% of the nation’s currency. Cryptocurrency exchanges responded with a lawsuit in the Supreme Court in September and won in March 2020.
The court victory prompted an almost 450% surge in trading in just two months since March, according to TechSci Research, reviving concerns as more Indians risk savings amid soaring unemployment and an economic decline exacerbated by the coronavirus pandemic.
Bitcoin marketplace Paxful enjoyed 883% growth between January and May 2020 from around $2.2 million to $22.1 million. WazirX, a Mumbai-based crypto exchange, grew 400% in March 2020 and 270% in April 2020 on month-on-month basis, according to TechSci.
India’s decision could have a significant impact as other Asian nation countries assess the risks and benefits of digital currencies. India’s neighbour and rival China, which banned initial coin offerings and virtual currencies in 2017, recently allowed bitcoin to be traded as virtual property, but not as money. It is also planning its own central bank digital currency. Both Singapore and South Korea regulate crypto trading.
India’s federal government think tank, Niti Aayog, is exploring the potential applications of blockchain tech, including land record and educational certificate management and pharmaceutical drugs supply chains, Bloomberg reported.
A renewed trading ban could affect more than 1.7 million Indians trading in digital assets and a growing number of companies setting up platforms for the trade, data show.
The news of the government’s plan coincided with some significant price drops across the altcoin market, but it was not clear at the time of publication if the two were connected.
Almost needless to say, news of the ban elicited a furious response on Twitter.
Perhaps Nikhil Sethi encapsulated the reaction best. He described New Delhi’s draconian plan as “evolution in reverse.”
Crypto YouTuber Lark Davis’s reaction to the news out of India was a bit saltier. Using China’s struggle to stamp out bitcoin as an example of the futility of such a move, he tweeted, “Oh p*** off! Fricking Indian government man! Stop harassing your citizens and let them have #bitcoin! You can’t stop this. China couldn’t. No one can.”