India Plans to Reintroduce Blanket Ban on Cryptocurrencies amid Credit and Banking Crisis
The Indian government has proposed a new law that will legally ban cryptocurrencies in the country. The law is likely to deal a blow to investors, cryptocurrency exchanges and other bodies dealing with cryptocurrencies.
A report appearing in the Economic Times publication says the country’s Finance Ministry has already sent its proposal to the inter-ministerial association for consultation. After that, the department will forward the plan to a high-ranking cabinet group that operates directly under Prime Minister Narendra Modi. Once the Union Council of ministers ratifies it, the proposed law will be forwarded to parliament for the final review.
The development comes only three months after the Supreme Court of India a de-facto ban on Bitcoin by the Reserve Bank of India (RBI) that prohibited banks from offering banking services to individuals and entities dealing in cryptocurrencies. The country’s highest court had said in its ruling:
“While we have recognized… the power of Reserve Bank of India to take preemptive action, we are testing in this part of the order the proportionality of such measure, for the determination of which RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none.”
A governmental panel headed by the country’s finance secretary Subhash Garg was reported to have drafted a law in July 2019 drafted placing a total ban on cryptocurrencies. According to the leaked document, users of cryptocurrencies would face a jail term of up to 10 years and/or a fine of up to an equivalent of $3.2 million. The draft stated in part:
“No person shall mine, generate, hold, sell, deal in, issue, transfer, and dispose of or use cryptocurrency in the territory of India.”
While not much was heard of the proposal following the leakage, news of a new proposal has sent fear within the Indian cryptocurrency community. The development pours cold water on the enthusiasm that has been experienced in the last three months. What with startups sprouting across the nation and all the individuals and related businesses that now face a bleak future?
The proposal to ban cryptocurrencies comes at a time when the subcontinent is undergoing a severe economic crisis. Asia’s third-largest economy is experiencing the slowest growth ever in over ten years with the Moody rating agency downgrading it to Baa3. Fitch and S&P have a low opinion on the country’s current economy, putting it at only one position above junk. Some analysts have blamed Covid-19, but a long history of bad loans has been the Achilles’ heel of the entire banking system.
The demand for crypto in the last three months saw leading crypto firms choosing India as the next crypto destination. Companies like Binance, the world’s leading crypto exchange by trade volume that recently acquired p2p crypto marketplace WazirX, could now be forced to pull back.