As many cryptocurrency startups and enthusiasts feared, the Indian government’s inter-ministerial committee (IMC) has submitted its report on the use of virtual currencies in India, which recommends a ban on cryptocurrencies.
An inter-ministerial committee set up by the government on virtual currencies has proposed banning of private cryptocurrencies in India by enacting a law and imposing fines and penalties for carrying on activities related to such cryptocurrencies.
Even though the committee called for a bitcoin ban, it also advised the government to not jettison the idea of creating a national cryptocurrency. The government-instituted panel also called for a standing committee on cryptocurrencies to monitor the emerging trends in the industry
As expected, the report highlighted the positive aspect of distributed-ledger technology (DLT) commonly known as blockchain and the various potential applications, especially in financial services, for example, in processes such as loan-issuance tracking, collateral management, fraud detection and claims management in insurance, and reconciliation systems in the securities market.
According to the report, there are many positive adoption areas for blockchain in banks and other areas of finance.
If passed into law, these recommendations would put India in a similar bracket as China in following the blockchain, not bitcoin model. Earlier in the year, the Reserve Bank of India (RBI) released a regulatory sandbox for fintech which excluded crypto-related businesses.
The proposed ban could also sound the final death knell for exchanges in the country. Since the RBI banned commercial banks from offering services to exchanges, many like Koinex and ZebPay have been forced to shut down their operations in India.