Digital Currencies Can Be Banned In India For Transactions; But Investors Can Hold Them As Assets

A recent report on Wednesday revealed that India is most likely to bar the use of cryptocurrencies for transactions or making payments.

Although, the government plans to allow them to be held as assets like gold, shares or bonds.

Classified As An Asset

Basically, this approach would avoid implementing a complete ban, according to the sources familiar with the government’s proceedings.

However, the government was keen to stop crypto companies, including exchanges and platforms from actively trying to attract new investors.

In order to gain acceptance and avoid a ban, it seems that the crypto community has made several representations to Indian authorities, for asking to be classified as an asset rather than as a currency.

Progressive And Forward-Looking Approach Towards Cryptocurrencies  

Last week, Prime Minister Narendra Modi chaired a meeting to discuss the future of cryptocurrencies in India.

They had the concerns that unregulated crypto markets could become avenues for money laundering and terror financing, according to the sources.

Further, the overall view within government is that steps taken should be proactive, “progressive and forward-looking” as cryptocurrencies represented an evolving technology, as per the person the aware of discussions at that meeting.

So far, the details of a bill were still being finalized, said the sources.

There is a possibility that the cabinet could receive the proposed legislation in the next two to three weeks for its consideration.

Reserve Bank’s Reluctance

Most likely, the Securities and Exchange Board of India (SEBI) could be designated as the regulator.

Although it has yet not been finalized, sources said.

In this case, so far, the Reserve Bank of India (RBI) has been very reluctant to accept cryptocurrencies.

It has expressed concerns over potential risks to macroeconomic and financial stability and capital controls.

May 2021, India’s digital currency market was worth $6.6 billion as compared to $923 million in April 2020, as per the blockchain data platform Chainalysis.

In the same regard, the RBI Governor, Shaktikanta Das reiterated the central bank’s concerns at an event on Tuesday,

Further adding that there was a need for deeper discussions, and noting the lack of a well-informed debate in the public domain.