India faces u-turn on plans to ban cryptocurrencies

India – one the largest digital economies in the world – is poised to declare cryptocurrency legal.

The Indian government has, for several years, taken a dim view of crypto and had even discussed the prospect of declaring wallets, exchanges and coins illegal. But now, in a surprise u-turn, ministers in New Delhi are on the brink of giving crypto the green light, albeit under strict regulation.

Almost a fifth of the world’s Bitcoin transactions take place in India, despite the constant overhanging fear of a huge government clampdown. Only 12 months ago, the Government of India warned its citizens to stay clear of cryptocurrencies, branding them as ‘Ponzi schemes’.

Local banks were even banned by the Reserve Bank of India from engaging with companies involved in cryptocurrency.

Properly investigated

However, according to an article in the Daily Express, this spurred some Indian exchanges into appealing their cases to the supreme court which then ordered the government to properly investigate and report back on the industry.

Following those calls for an investigation, politicians have now begun to embrace the prospect of digital assets having a future for India’s economy and its 1.3 billion population.

According to the Express article, the country had been on course to completely ban cryptocurrency, with calls from the authorities to make ownership and trading of Bitcoin illegal. It said some ministers even wanted to call for the jailing of serial offenders.

But with somewhere in the region of 2.5 million users of Bitcoin alone in India, any form of clampdown looked utterly pointless. So a government taskforce was established in New Delhi to report back on the direction any potential legislation should take.

Complete turnaround

“But they have essentially fuelled a complete turnaround in official thinking,” a top government adviser told the Express.

“Recognising the enormous magnitude of coming down hard on cryptocurrency across all 29 states, the research has now forced the hand of the government to align itself with India’s obvious talent in digital technology.”

The report is due to be submitted by the end of February and is expected to pave the way for widespread regulation of cryptocurrencies and their use throughout the country, but the move heralds an acceptance from New Delhi that crypto has a huge future.

“This isn’t just about one of the world’s largest populations being given approval to forge ahead with embracing things like Bitcoin,” added the adviser.

“This will also have far-reaching effects throughout the world because there are exchanges, wallets and providers across the globe with huge customer bases in India where, up until now, the people thought it was going to be made illegal.

“It’s now going to be the opposite situation which can only see those customer bases grow exponentially.”