India to ban most cryptocurrencies

New Delhi: India´s government will introduce a bill to ban private cryptocurrencies and create a framework for a central bank-backed digital money, parliament said in a shock announcement late Tuesday.

The new bill to regulate virtual currencies will be introduced in the winter session of Parliament.

The proposed bill "seeks to prohibit all private cryptocurrencies in India", the Lok Sabha said, and comes after Prime Minister Narendra Modi warned last week that Bitcoin presents a risk to younger generations and could "spoil our youths" if it ends up "in the wrong hands".

It is the latest such move by a major emerging economy, after China declared all cryptocurrency transactions illegal in September.

The government will allow only certain cryptocurrencies to promote the underlying technology and its uses, according to a legislative agenda for the winter session that is set to start later this month.

The bill, to come before the new legislative session, will allow for some exceptions to promote cryptocurrency technology, according to parliament´s bulletin of upcoming business, but no further details about the proposed legislation were released.

Through the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, India is also looking to make a framework for the official digital currency that will be issued by the Reserve Bank of India.

The central bank has voiced "serious concerns" about private cryptocurrencies and is set to launch its own digital currency by December, while warning it has "serious concerns" about private cryptocurrencies like Bitcoin, Ethereum and others.

Bitcoin, the world's biggest cryptocurrency, is hovering around $60,000, and its price has more than doubled since the start of this year, attracting hordes of local investors.

No official data is available but industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around 400 billion rupees ($5.39 billion).

India´s cryptocurrency market has boomed since the country´s Supreme Court overturned a previous ban in April last year, growing more than 600 percent over the past year according to research by Chainalysis.

Between 15 and 100 million people in Asia´s third-largest economy are estimated to own cryptocurrencies, with total holdings in the billions of dollars.

Their investments will now face an uncertain future.

Earlier this year, India's government considered criminalising the possession, issuance, mining, trading and transference of crypto assets, but a bill was not introduced.

Since then, the government has changed its stance slightly and is now looking to discourage trading in cryptocurrencies by imposing hefty capital gains and other taxes, two sources said.

But a senior government official told Reuters that the plan is to ban private crypto assets ultimately while paving the way for a new Central Bank Digital Currency (CBDC)

Prime Minister Narendra Modi chaired a meeting to discuss the future of cryptocurrencies amid concerns that unregulated crypto markets could become avenues for money laundering and terror financing.