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Cryptocurrency prices tank following India’s plan to ban private crypto

The Government of India is reportedly going to table a bill that seeks to ban private cryptocurrencies, Indian media reported on 23 November.

Following the news, all major cryptocurrencies went in the red by the next morning. According to NDTV, Bitcoin was down over 17 percent, Ethereum by almost 15 percent, and Tether by around 18 percent.

A look at some important updates

Cryptocurrency Bill in the Parliament

‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ is set to be introduced in the upcoming winter session of Parliament. It is one of the 26 new bills that the government is expected to introduce in the session.

An official document cited by the media underlines that the government is aiming to launch an official digital currency by the Reserve Bank of India (RBI) — the country’s central bank.

“Bill seeks to create a facilitative framework for creation of official digital currency to be issued by RBI & ban all private cryptocurrencies in India,” Indian news agency ANI tweeted on 23 November evening.

Lok Sabha (Lower House) Bulletin Part II released on the same day described the purport of the bill as, “To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”

Previous plans

Digital Currency
Image: Courtesy of Executium/@executium/Unsplash

The government’s plan to ban cryptocurrency has been reportedly on since last year. There were plans to introduce the bill in this year’s budget session, but it was scrapped. A committee to deliberate over cryptocurrency and its existence in India was subsequently formed.

While the RBI hasn’t announced its crypto, it has previously criticised digital currencies, such as Bitcoin, and raised concerns over their unregulated growth.

A few days ago, RBI governor Shaktikanta Das sounded the alarm over cryptocurrencies.

According to an 11 November report by the Indian news agency Press Trust of India (PTI), Das said at an event, “Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint. The government is actively looking at the issue and will decide on it. But as the central banker, we have serious concerns about it and we have flagged it many times.”

PM Modi’s take on cryptocurrency

Indian Prime Minister Narendra Modi, too, had previously warned about the possibility of digital currencies being misused.

“Take crypto-currency or bitcoin, for example. It is important that all democratic nations work together on this and ensure it does not end up in the wrong hands, which can spoil our youth,” the PM said on 18 November at an online cybersecurity forum hosted by the Australian Strategic Policy Institute.

Interestingly, India reportedly has over 100 million crypto owners, making the country one of the largest cryptocurrency markets in the world.

Regulation on the mind

Cryptocurrency
Image: Courtesy of Executium/@executium/Unsplash

Crypto transactions were effectively banned by the RBI in India in 2018 when it released a circular prohibiting banks and entities regulated by it from providing services with connection to virtual currencies. However, the Supreme Court set aside the ban in 2020.

A Standing Committee on Finance on digital currencies was held on 16 November, which agreed that cryptocurrency must be regulated but cannot be stopped.

Regulation is also what former RBI governor Raghuram Rajan had pointed at.

Speaking to CNBC-TV18, Rajan had said, “In the US, crypto is a USD 2.5 trillion problem that nobody really wants to regulate.”

He also compared the cryptocurrency craze to the 17th century Tulip mania in the Netherlands and called them “unregulated chit funds.”

“If things have value only because they because they will be pricier down the line, that’s a bubble,” Rajan warned.

He also said that only a handful of the approximately 6,000 cryptocurrencies in existence today would survive.

(Main and Featured images: Executium/@executium/Unsplash)

Manas Sen Gupta
Manas enjoys reading detective fiction and writing about anything that interests him. When not doing either of the two, he checks Instagram for the latest posts by travellers. Winter is his favourite season and he can happily eat a bowl of noodles any time of the day.