The re-election of Indian prime minister Narendra Modi gives his BJP party the parliamentary muscle to push through its agenda – which looks set to include the banning of cryptocurrencies such as Bitcoin, the subject of a draft Bill.
The ‘Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019’ has been circulating inside various ministries, including the Department of Economic Affairs, the Central Board of Direct Taxes, the Central Board of Indirect Taxes and Customs, and the Investor Education and Protection Fund Authority.
Ostensibly designed to address concerns about fraud and money laundering concerns, the Bill would give government wide powers to outlaw cryptocurrencies. The Economic Times of India has released committee minutes which say the government aims “to protect the investors”, adding: “Department of Revenue may immediately issue a notification under the Prevention of Money Laundering Act (PMLA) to completely ban the sale, purchase and issuance of all forms and types of cryptocurrency. All exchanges dealing with crypto should be immediately shut down.”
Digital currency controls
The Ministry of Corporate Affairs (MCA), which regulates corporate activity in India and protect investors, recently said that the sale, purchase and issuance of cryptocurrencies are being carried out on false inducements of massive returns. It described the sale and issue of cryptocurrencies as Ponzi schemes, which are being used to “defraud gullible investors.”
However, experts in the field of cryptocurrencies argue that a ban on digital currencies will be unenforceable. Nischal Shetty, CEO of Mumbai-based crypto-exchange WazirX, said: “The core idea is that these coins are completely decentralised and currently no government has the technology to monitor them unless the purchases are made through regulated exchanges.
“All exchanges in India are mandated to follow due processes such as KYC compliances and maintain a log of transactions.”
Out of the banks, into the exchanges
In June 2018, the Reserve Bank of India introduced a ban preventing all regulated financial institutions and banks from dealing in virtual currencies. The bank cited concerns over “consumer protection, market integrity and money laundering,” and its move led to a widespread exodus of Indian investors. However, nearly US$1bn of crypto-currencies such as Bitcoin, Ethereum and Ripple continue to be bought and sold daily from Indian exchanges, industry players claim. The industry is thought to be worth US$1.5bn, with about 5m customers.