India Launches Legislation to Ban the Trade and Mining of Cryptocurrency

WASHINGTON, D. C.-A new bill proposed in India could outlaw the trade and mining of cryptocurrencies like Bitcoin and Etherum following their massive value gains in recent weeks.

The bill would call for holders of cryptocurrency in India to liquidate their shares within 6 months should it pass, according to an Indian government official. This measure follows political sentiment from January, banning decentralized digital currency systems in an effort to build a state-based digital currency market.

After this 6 month period, holding cryptocurrency would be met with penalties and fines. Jail time has been proposed, but officials did not say if this was to be included in the bill.

India would be the first nation on the planet to completely ban cryptocurrency with this new proposed legislation. The only other nation with heavy restrictions on crypto is China, who banned the trade and mining of digital currencies in 2019. Chinese citizens may still hold crypto under the current law.

Indian officials told news outlets that they are not “closing their minds” to the possibilities of digital currency platforms. The bill will supposedly employ a “calibrated” approach, both in the creation of a state-backed system and in the implementation of penalties for investors who don’t liquidate their assets.

The Reserve Bank of India has cited concerns about the effects of cryptocurrency on the market stability, noting that the amount of money currently invested could disappear overnight if crypto markets were to crash like they did in 2018. 

Mark Mobius, founder of Mobius Capital Partners, told CNBC that he hopes that Bitcoin and other cryptocurrencies don’t crash, fearing that much of the US stock market’s recent success is propped up by the sudden rise in crypto value. 

The proposed bill had adverse effects on cryptocurrency in the Monday and Tuesday markets, with Bitcoin dropping from its record high of $61,000 that it achieved on Saturday. Value in Bitcoin plummeted by 10% on Monday following the news.

Ethereum was not immune to the sudden dive in the market, falling from a high of $1888 on Monday to hover around $1775.

Both Ethereum and Bitcoin managed to gain back some of that lost ground Wednesday afternoon along with most of the US stock market, following Fed Chairman Jerome Powell’s statements to the press at 2 p.m. EST.  Bitcoin has since surged to $57,000 at market close, with Ethereum rebounding to $1822 at the time of writing. 

Crypto trades have surged in India despite the market pullback and looming threat of government regulation. Industry leaders estimate that approximately 8 million Indian investors now hold 100 billion rupees ($1.4 billion) in cryptocurrency investments.

Local crypto exchanges in India have seen a massive influx of money and users. Bitbns told reporters that it was seeing 30 times the user volume from last year, while ZebPay said they “did as much volume per day in February 2021 as they did in all of February 2020”.

Investor sentiment in India is to stick with the crypto market until the proposed ban goes into effect, hoping to reap the benefits of the market boom before being forced out. Bitcoin is still up 300% in value year-to-date, and is still receiving much attention from large financial institutions.

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