The legislation follows similar restrictions in China, where financial regulators and its central bank have made all digital transactions illegal, and is expected to launch the digital yuan in 2022.
The US also plans to enforce more control over cryptocurrencies, such as Bitcoin, which are growing in scale.
In a parliamentary bulletin listing upcoming legislation, the proposals can be seen in a paragraph on “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”.
The bill makes clear that India aims to create a “facilitative framework for creation of the official digital currency to be issues by the Reserve Bank of India.” Further, private cryptocurrencies will not be completely banned, and the bill will allow “for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Just last week, India’s prime minister, Narendra Modi, said that cryptocurrencies could “spoil our youth” and India’s central bank has also warned that they could pose “serious concerns on macroeconomic and financial stability.”
The announcement caused the dollar-linked stable coin tether to slump by 25% (60 rupees) on Wednesday, and the price of bitcoin to fall by 2.7% ($56,171).
Laith Khalaf, head of investment analysis at AJ Bell said: “India’s plan to ban cryptocurrencies has not wrought the same damage on the bitcoin price as China’s summer crackdown, but it nonetheless marks yet another stumbling block in crypto’s advancement as an economic force in the real world.”
India’s future central bank digital currency’s (CBDC) possible uses include programmable payments, cross-border remittances, retail payments, and micro, small, and medium enterprise (MSME) lending.
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