India may ban all cryptocurrency and have an official one of its own

The Centre plans to ban all digital currencies and introduce an official cryptocurrency, which will be issued by none other than the Reserve Bank of India.

The government has listed the legislation for debate in the current Budget session. The law will “create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India (RBI),” read the agenda, published on the Lok Sabha website.

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The legislation seeks “to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” the agenda said.

The government’s plan to ban private cryptocurrencies is not new. A committee proposed to stop all of them in 2019 with imprisonment of up to 10 years and penalty for those found using digital currencies. The committee also suggested that the government launch an official digital currency, an alternate to bank notes.

About two years back, all financial institutions were barred by the RBI from making any deals with individuals or businesses that dabble in digital currencies like bitcoin. The Supreme Court of India overruled the RBI order in March 2020 and allowed banks to handle cryptocurrency transactions from exchanges and traders.

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Cryptocurrencies all over the world remain outside the ambit of governments that want to regulate the digital asset. However, no major country has so far shown the courage to ban any virtual currency despite concerns about misuse of consumer data and possible negative effect on the financial system.