Even though Bitcoin — the king of cryptocurrencies— has evoked mixed reactions from governments and the central bankers across the world, the government seems to have made up its mind: it may be planning to kill it with a law.
The tax department is considering a move to ban the currency, according to a report on ET Now. This will render all transactions and holdings in Bitcoin and other cryptocurrencies illegal. The government thinks cryptocurrencies aid tax evasion and round tripping. The government could soon bring a law to ban cryptocurrencies, the report said, citing sources.
Finance Minister Arun Jaitley had clarified in his Budget speech that crypto currencies were not legal tender and that the government would not recognise them.
A group under the chairmanship of Subhash Chandra Garg, secretary, department of economic affairs is in the last stages of deliberation, and is expected to come out with the government's approach on the entire spectrum of issues related to crypto currencies.
However, Jaitley had announced that the government would adopt blockchain, the technology that supports crypto currencies.
The Reserve Bank of India (RBI) is already looking at the brave new world of crypto currency. The success of Bitcoin may have encouraged the central bank to consider its own crypto currency since it is not comfortable with this non-fiat crypto currency.
A group of experts at RBI is examining the possibility of a fiat crypto currency which would become an alternative to the Indian rupee for digital transactions.
Last year, it was reported the government could launch its on cryptocurrency, Lakshmi.
RBI's crypto currency could be a part of creating its own Blockchain, a distributed digital ledger and technology that supports crypto currencies. State Bank of India has taken the lead in bringing lenders and tech companies together for using Blockchain technology to share information among banks which will eventually help prevent frauds and tackle bad loans which are almost one-fifth of banks' loan book. The SBI's initiative, christened Bankchain, is in partnership with IBM, Microsoft, Skylark, KPMG and 10 commercial banks.
The government had started a crackdown on cryptocurrencies a few months ago, suspecting tax evasion and of ponzi schemes through cryptocurrencies. The income tax department had sent tax notices to tens of thousands of people dealing in cryptocurrency. The notices were sent after a survey assessed the penetration and patterns of virtual currency trade.