Mumbai: A report by Economic Times on Wednesday citing government sources has revealed that India is likely to ban the use of cryptocurrencies for making payments, but will allow and regulate trading of crypto as assets.
The report noted that this approach would avoid implementing a complete ban, though the government was keen to stop crypto companies, including exchanges and platforms from actively trying to attract new investors.
Sources told the newspaper that details of a bill were still being finalised, and the cabinet could receive the proposed legislation in the next two to three weeks for its consideration.
The Securities and Exchange Board of India (SEBI) could be designated as the regulator, though that has not been finalised, the newspaper reported.
The government is working on the taxation aspects and the upcoming legislation is expected to address this, a source told to ET.
The government is also looking to introduce the bill in the upcoming winter session of Parliament.
The news comes at a time when the crypto community has made several representations to Indian authorities asking to be classified as an asset rather than as a currency, in order to gain acceptance and avoid a ban.
Meanwhile, the Union Finance Ministry amid a global surge in cryptocurrencies had stated that it will take a decision on a state-issued cryptocurrency soon but ban all private cryptocurrencies. In a letter to VHP leader Girish Bharadwaj, Union Dy Director (Currency) Sanju Yadav had affirmed that all private cryptocurrencies are still not considered as legal tender or coin in India, but the govt may introduce an official digital currency in India. The VHP leader had sought a ban on all cryptocurrencies alleging its usage to fund terrorism, drugs and other 'anti national activities'.
Prime Minister Narendra Modi last week chaired a meeting to discuss the future of cryptocurrencies amid concerns that unregulated crypto markets could become avenues for money laundering and terror financing, sources had said on Saturday.
With an understanding that crypto cannot be stopped in the country, the Members of Parliament (MPs) on Monday during a Parliamentary panel meet said that there is a need for regulation.
While flagging off full-page crypto advertisements in national dailies, MPs said that the security of investors' money is the most serious concern for all members.
"This is almost like the Ponzi scheme which got strong legal regulations later," MPs said, adding that El Salvador is the only country to legalise crypto so far.
The Reserve Bank of India (RBI) has so far appeared very reluctant to accept cryptocurrencies, expressing concerns over potential risks to macroeconomic and financial stability, and capital controls.
India's digital currency market was worth $6.6 billion in May 2021, compared with $923 million in April 2020, according to blockchain data platform Chainalysis.
RBI Governor Shaktikanta Das reiterated the central bank's concerns at an event on Tuesday, saying there was a need for deeper discussions, and noting the lack of a well-informed debate in the public domain.