India mulls ban on cryptocurrencies

29 Apr 19

India’s government is reportedly considering plans to ban the use of cryptocurrencies, such as Bitcoin, in a bid to tackle fraud and money laundering.

A draft bill is now being circulated in government departments, according to the influential Economic Times, with anonymous government sources indicating support for the move.

A widespread crackdown on private cryptocurrencies, such as Bitcoin, has already stunted the growth of this sector, with trading volumes falling significantly last year in India.

The newspaper reports that a draft ‘Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019’ is currently being circulated among government officials.

It cites anonymous government sources indicating that the Department of Economic Affairs, the taxation board, and the Investor Education and Protection Fund Authority all think that the sale, purchase and issuance of cryptocurrency should be banned.

A government panel chaired by finance secretary Arun Jaitley that was tasked in late 2017 with drawing up regulations to cover cryptocurrency has reportedly emerged as a key champion of an outright ban.

Last year the central bank, the Reserve Bank of India, prohibited banks and financial institutions from allowing customers to purchase Bitcoin or other cryptocurrencies and providing services to businesses dealing in them.

Critics of the move claim it is based on an erroneous belief that cryptocurrencies – used by an estimated 5-6 million people in India – are implicated in money laundering or schemes to defraud gullible investors.

India’s financial authorities are inclined towards draconian currency measures, and in late 2016 abruptly withdrew from circulation 500-rupee and 1,000-rupee bills, making 86% of India’s currency invalid overnight.

The policy was in part an effort to boost the use of transactions through the government’s own digital payments initiative, which has established a Unified Payment Interface (UPI) to enable e-payments directly through banks and is seen as key to improving financial inclusion but also boosting tax collection.

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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