India is considering legislation to ban cryptocurrencies, following the step of China as the central bank aims to develop and promote its own digital currency.
In the bill called Cryptocurrency and Regulation of Official Digital Currency Bill, announced late Tuesday, parliament is pushing to ban private cryptocurrencies and create a framework to develop and promote a central bank digital currency (CBDC).
It will be put before the lower house in next week’s session, according to a bulletin of parliament’s upcoming business.
India, like China, has been critical about cryptocurrencies as they seek to protect traditional financial institutions from its growing impact. The two largest economies in Asia are now towing the same path after China declared all cryptocurrency transactions illegal in September.
The bill “seeks to prohibit all private cryptocurrencies in India,” but would allow “for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
The bill would also “create a facilitative framework for [the] creation of the official digital currency to be issued by the Reserve Bank of India,” it said.
Another country that has taken a similar step is Nigeria, though not through parliamentary action. In February, the Nigerian central bank banned all regulated financial service providers from offering crypto-related services. The central bank has gone ahead to launch a digital currency called eNaira.
India set the pace as early as 2018. In April 2018, the Reserve Bank of India (the central bank) had banned banks and entities regulated by it from supporting crypto transactions. Though the decision was overturned by the Supreme Court in March this year, the government’s concern about the use of virtual currencies in India remains.
The RBI had said the use of private cryptocurrencies posed a threat to India’s macroeconomic and financial stability and it is deeply concerned.
“Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint,” the central bank chief Shaktikanta Das said at an event earlier this month.
“The government is actively looking at the issue and will decide on it,” Das was quoted as saying by the Indian Express newspaper. “But as the central banker, we have serious concerns about it, and we have flagged it many times.”
In the same vein, Prime Minister Narendra Modi said cryptocurrencies need to be closely policed, adding that they pose a risk to young people and could “spoil our youth” if they end up “in the wrong hands.”
Since the Supreme Court’s February ruling, India’s crypto market has seen more than 600% growth amidst increase in global institutional adoption.
What could the bill mean for bitcoin?
Bitcoin plunged after China took a swipe on cryptocurrency miners. For months, the leading crypto coin along with altcoins witnessed massive selloffs that plummeted the crypto market, cutting its value by half. Eventually, the market shrugged off China’s impact, and bounced back to hit all-time highs.
China was a bigger crypto country than India, having the largest percent of the mining. Therefore, the impact of the Chinese ban on the crypto market was expected. However, bitcoin shrugging it off within a short period indicates that a possible Indian ban will have less effect on the cryptocurrency market.
Tuesday’s announcement did not affect the general price of bitcoin, though prices of major cryptocurrencies on domestic exchanges fell sharply overnight. Bitcoin went down by around 18.53 percent, Ethereum fell by 15.58 percent, and dollar-pegged Tether plunged by 18.29 percent, according to data from Indian crypto exchange CoinSwitch Kuber.