Indian finance minister vows cryptocurrency crackdown

Arun Jaitley to stop use of digital coin for illicit deals as domestic interest in currency surges

Marcus Zallman
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Finance minster Arun Jaitley, in his budget speech on Feb. 1, stated that the government will do everything to discontinue the use of bitcoin and other virtual currencies in India. He reiterated that India does not recognise them as legal tender and will instead encourage blockchain technology in payment systems.

“The government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities,” Mr Jaitley said, as the government outlined measures to revive the country’s flagging growth rate.

This declaration comes after months of speculation over the fate of cryptocurrencies in India, home to a large number of bitcoin traders and investors. Bitcoin prices on Indian exchanges have been consistently higher than those prevailing internationally.

Over the last few months, the government and the Reserve Bank of India have repeatedly expressed their discomfort over bitcoin and other e-currencies. Late last year, the finance ministry dubbed them a ponzi scheme. “There is a real and heightened risk of investment bubble of the type seen in ponzi schemes which can result in sudden and prolonged crash exposing investors, especially retail consumers losing their hard-earned money,” the ministry had said. “Consumers need to be alert and extremely cautious to avoid getting trapped in such ponzi schemes.”

While the move is expected to trigger short-term panic selling, the greatest effect is likely to be on the cryptocurrency exchanges that has cropped up in India in the recent past. These exchanges were already facing trouble on account of the regulatory ambiguity. Several major banks are reported to have closed down their accounts out of the fear of high risk trading and the Registrar of Companies is apparently no longer registering companies intending to operate as exchanges.