The Indian government has just set up an inter-ministerial committee for consultation on banning bitcoin and other cryptocurrencies. “Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019″ draft law has already been circulated inside different government departments for a consult.
On Friday, 26th April, 2018, it was reported that the Indian government was looking to ban cryptocurrencies and a commission headed by Finance Secretary Subhash Chandra Garg had already submitted a draft with their recommendations. The commission was created by the government last year and initial reports suggested that a cryptocurrency ban was inevitable. It is expected that the draft bill would be signed by the upcoming government as soon as the elections wrap up in the country. The head of the commission, Subhash Chandra, has been a vocal critic of bitcoin and cryptocurrency in general. In a tweet posted two years ago he called bitcoin a “Ponzi Scheme.”
Cryptocurrencies like bitcoins are neither currency nor coin. Not legal tender in India at all. Trade in these currencies has assumed character of classical Ponzi schemes. Limited supply and uninformed demand makes every new investor assume higher risk. No underlying real value.
— Subhash Chandra Garg (@SecretaryDEA) December 30, 2017
The Taxation Department, Ministry of Economic Affairs and Investor Education department have already supported the draft bill and think that the sale and purchase of any digital currency in India should be illegal. The government has labeled cryptocurrencies as a tool for money laundering; the whole premise of this law is to stop people from laundering money acquired through questionable means. In 2017 the Indian tax department raided dozens of cryptocurrency exchanges on suspicions of involvement in money laundering actives. The other concern is the effect on the Indian Rupee, and the government is worried that the rupee may destabilize if then trend catches on. A government official in an Interview to a local bitcoin magazine said:
“If Bitcoin and other digital currencies are going to be allowed to be used for payments then whether it will end up destabilizing the fiat currency is a significant concern for them. The overall impact on the financial ecosystem that it is likely to have is still unclear, and it has been a challenge to convince them on this particular point”.
The government due to the volatility of bitcoins price has labeled cryptocurrencies as a get rich quick Ponzi scheme targeted at novice investors. The government has been discouraging its citizens from buying cryptos in hopes of massive return. The principal institutions like the board of economic affair and investment instead of promoting cryptos have taken a negative stance. According to one report on the issue:
“The ministry of corporate affairs has in its feedback to the department of economic affairs pointed out the sale purchase and issuance of cryptocurrencies such as Bitcoin, Etherium & Cashcoin, etc. are being done by individuals and companies on false inducements of massive returns”.
Indian Government Wants Centralized Control
In 2016 the Indian government made a very controversial move and announced a demonetization policy, the 1000 and 500 rupee banknotes were withdrawn within a fortnight, and new bills were introduced. The move was aimed to reverse currency counterfeiting. However, it did just the opposite. Big hoarders instead of keeping the money in INRs exchanged it with forex and cryptos thus making the move ineffective.
Despite the significant increase in crypto investment after the demonetization debacle the size of the industry in a country of a billion or so people is still minute. Despite being responsible for the 8th of the world’s population the country accounts for less than 2% of the total cryptocurrency market cap. Thus, a hard stance by the Indian government won’t affect the global cryptocurrency landscape, but Indian investors would surely lose a lot.