India to move to ban cryptocurrencies, bitcoin dives instantly

Tougher than the US! Just now, news came from Reuters that Indian government officials said that India is proposing legislation to ban cryptocurrencies and punish trading, or even holding them. The new law will give cryptocurrency holders six months to liquidate such assets.

Finance Minister Nirmala Sitharaman said in an interview that the so-called proposed cryptocurrency ban is not closing the window on all cryptocurrencies, according to the Times of India on March 15. She said, “Both the Supreme Court and I have made comments on this, while the central bank may be calling for a central bank digital currency, but we are clear that it is not to close all cryptocurrency options.” She said officials will allow people to experiment with blockchain, bitcoin or other cryptocurrencies using a certain window. Meanwhile, a cabinet meeting has been held to discuss cryptocurrencies, and relevant programs will be launched soon.

It is reported that India currently has about $1.4 billion in cryptocurrency investments, with the number of registrations and funds traded growing nearly 30 times in the past year. The government had in 2019 proposed a prison term of up to 10 years for those who mine, generate, hold, sell, transfer, dispose, issue or trade in cryptocurrencies.

Following the above news, Bitcoin, which sang its way past $60,000 over the weekend, took a quick dive, dropping more than 3%, with the price killing more than $2,000. So, is this world’s most bullish asset about to cool off? In fact, the U.S. just investigated the cryptocurrency exchange Cryptocurrency last Friday, and the recent U.S.-led and Indian-led “2+2 talks”, after which India immediately took action, is also meaningful.

India’s move

According to Reuters, a senior Indian government official said that India will propose a law to ban cryptocurrencies. Penalize trading, or even holding, cryptocurrencies. The new law would give cryptocurrency holders six months to liquidate such assets.

The official, who has direct knowledge of the plan, said the bill is one of the world’s strictest policies against cryptocurrencies and that it would criminalize the possession, issuance, mining, trading and transfer of crypto assets.

The measure is in line with a January government agenda that calls for a ban on private virtual currencies such as bitcoin while creating a framework for an official digital currency. With Prime Minister Narendra Modi’s government holding a majority in parliament, officials are confident the bill will pass. If the ban becomes law, India will become the first major economy to make it illegal to hold cryptocurrencies.

Bitcoin, the world’s largest cryptocurrency, hit an all-Time high of $60,000 on Saturday and has nearly doubled this year as acceptance of payments has increased amid support from prominent backers such as tesla CEO Elon Musk.

Senior Indian officials had called cryptocurrencies a “Ponzi scheme,” but this month Finance Minister Nirmala Sitharaman allayed some investors’ concerns. She said, “I can only give you a clue that we are not closed and we are looking at ways to experiment in the digital world and in cryptocurrencies.”

India may aspire to ban private crypto assets while promoting blockchain. Blockchain is a secure database technology that is both the basis for virtual currencies and a system that experts say could revolutionize international transactions.

An Indian government working group had recommended in 2019 a prison sentence of up to 10 years for those who mine, generate, hold, sell, transfer, dispose, issue or trade in cryptocurrencies. The official declined to say whether the new bill would include jail terms and fines, or provide more details, but said discussions were still in the final stages.

In March 2020, India’s Supreme Court struck down a 2018 order by the central bank that banned banks from trading in cryptocurrencies. This led to an influx of investors into the market. The court ordered the government to take steps and draft a law on the matter.

The Reserve Bank of India last month again expressed concerns, saying cryptocurrencies are a risk to financial stability. The central bank has been working to launch its own digital currency, and the government’s bill would encourage the move.

Bitcoin takes a quick dive, can it still be played?

Bitcoin took a quick dive of over 3% following the above news, but then the decline narrowed.

According to industry estimates, trading volumes are increasing despite the Indian government’s threat to impose a ban, with 8 million investors currently holding 100 billion rupees ($1.4 billion) in cryptocurrency investments. Money is increasing rapidly every month and you don’t want to sit on the sidelines,” said Sumnesh Salodkar, a cryptocurrency investor. While people may be panicking over the ban, greed is still driving these choices.”

Local cryptocurrency exchange Bitbns has seen a 30-fold increase in user registrations and money inflows from a year ago, said Gaurav Dahake, a veteran trade management expert. unocoin, one of India’s oldest exchanges, added 20,000 users in January and February despite fears of a ban.

Despite the euphoric market, investors are aware that the boom could be in danger. Naimish Sanghvi, who started betting on digital currencies last year, told Reuters, “If this ban is official, we will have to comply.” He expressed concern about a potential ban. “Until then, I’d rather panic and compete with the market than panic and sell off.”

Notably, on March 13 BST, markets suddenly revealed that the U.S. Commodity Futures Trading Commission (CFTC) is investigating cryptocurrency exchange Coinan for allowing U.S. persons to bet against U.S. rules.The CFTC is investigating whether the company allowed U.S. residents to trade derivatives it regulates. The company is not registered with the CFTC. However, there are no allegations of misconduct against Cryptocurrency and the investigation may not lead to any enforcement action.

Coincidentally, the Quadrilateral Security Dialogue (Quad) between the U.S., Japan, India and Australia held its first online leadership summit last week. The content of the talks is not known, but combined with this sensitive point in time and India’s actions, India’s move may not be accidental. While the U.S. may have realized the impact of digital currencies, especially bitcoin, on the U.S. dollar, which is why it took enforcement action last week, India’s move is more likely to be a throwing of stones. With Russia getting involved in bitcoin trading, the pressure on the dollar could be even greater, so the action against bitcoin should be greater later on as well.