India announces intent to prevent cryptocurrency use

The Government of India has announced it will move to end the use of cryptocurrencies in the country. The move sees India become the latest nation to prepare to snuff out the likes of Bitcoin, as a growing number of international leaders suggest such platforms are linked to criminal networks.

Finance Minister, Arun Jaitley, declared that India will move to stamp out use of cryptocurrencies, which it considers illegal, in a statement at the beginning of February. Jaitley launched a no-holds-barred attack on virtual currencies such as Bitcoin, which he suggested are often used to finance illegal undertakings.

“The Government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system,” Jaitley told Parliament, during his annual budget speech. However, the minister did add that the government would explore use of blockchain technology proactively to speed the move toward a digital economy, despite the links of blockchain to the world of cryptocurrencies.

According to Amit Maheshwari, partner at tax consultants Ashok Maheshwary & Associates, Jaitley’s announcement could trigger “panic selling” in in India, as similar announcements have done to notoriously volatile cryptocurrencies in other countries. Bitcoin prices peaked at more than $19,600 last month, but have nearly halved in value since, damped by fears that regulators could clamp down on the cryptocurrency in a bid to curb speculation.

Governments around the world are grappling with how to regulate cryptocurrency trading, and policymakers are expected to discuss the matter at a G20 summit in Argentina in March – following high profile bans in China and South Korea. UK Prime Minister Theresa May also alluded to taking measures to tackle cryptocurrency, during an interview at the recent World Economic Forum in Davos, Switzerland.

India’s latest manoeuvring comes after a sustained period of scrutiny for cryptocurrency in the country. In January, India’s income tax authorities waded into the matter, sending notices to tens of thousands of people dealing in cryptocurrency such as Bitcoin, after a nationwide survey revealed transactions of more than $3.5 billion over a 17-month period. In December 2017, meanwhile, Jaitley’s ministry warned cryptocurrency investors, likening such investments to Ponzi schemes.

However, Kartik Shinde, a Partner at consultancy EY India, was keen to point out that Jaitley’s rhetoric might still not amount to an outright ban on cryptocurrency, stating, “The choice to invest in Bitcoin and other cryptocurrencies will be open to end users, the government is taking proactive measures to curb fraud and illicit transactions.”