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India Mulls Blanket Ban On Cryptocurrencies With New Law

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The Indian government is mulling a blanket ban on dealing in virtual currencies such as Bitcoin in the country, according to The Economic Times report. The Indian Ministry of Finance is already said to have drafted a proposal to pursue the ban. The government has been concerned about the use of cryptocurrencies in money laundering and criminal activities as the trail cannot be established.

India is now looking to introduce a law to ban trading in cryptocurrencies in the country after the effort of the Reserve Bank of India to put a plug on it failed with a circular. The government now sees a legal framework to be more effective and punitive.

The proposed law would make it illegal to mine, generate, hold, sell, deal in, issue, transfer, dispose off or use cryptocurrency in India. According to the report, a note has been moved by the finance ministry for inter-ministerial consultations. It will then be sent to the Union Council of Ministers and then be forwarded to the parliament for final review.

In July 2019, a high-level committee of the Government of India, entrusted to draft a policy on cryptocurrencies, had recommended that private cryptocurrencies like Bitcoin should be banned. The ban should cover cryptocurrency exchanges, investors, traders and other financial intermediaries, the recommendation said.

The committee also went to the extent of recommending up to 10 years jail term, and a fine of up to 250 million Indian Rupees or $3.3 million for a repeat offense. The committee observed that no country treats virtual currencies as legal tender.

At the same, the panel urged the government to consider issuing official digital currency with a status of a legal tender and regulated by the central bank. It also recommended the promotion of blockchain technology in selected areas.

The four-member inter-ministerial committee was constituted in 2017 to study the impact of cryptocurrencies and to make recommendations to regulate them.

The proposed new law is expected to deal a telling blow to investors, exchanges and other entities that began dealing in the digital asset after India's Supreme Court in early March struck down the RBI's curbs on financial institutions under its preview to deal with cryptocurrencies.

This bought an end to the ban on the country's commercial banks and other financial institutions providing services to businesses and individuals dealing in cryptocurrencies such as Bitcoin. The RBI had imposed the ban in April, 2018, but it was effective from July 2018.

The top court had ruled that the curbs were unreasonable and illegal. The ruling followed a plea by a group of petitioners and the Internet and Mobile Association of India (IMAI) challenging the RBI ban.

Earlier in 2019, the RBI itself had said cryptocurrencies such as Bitcoin and other crypto-assets currently did not pose risks to global financial stability. This was revealed in a document published by the RBI then titled "Report on Trend and Progress of Banking in India 2017-18."

In April 2018, the RBI had initially considered launching its own central bank digital currency called "Laxmi" as a stablecoin tied to the rupee. However, it shelved the idea later saying it's too early to even think about it.

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