India could ban holding Bitcoin and other cryptocurrencies

The Central Bank of India’s request, formally sent to the Indian government, could spark panic in the cryptocurrency market. If approved, the measure would make simply holding Bitcoin illegal for residents of one of the world’s most populous countries. Thus, it would not be out of the question that some citizens and investors hoping to increase their wealth by investing in cryptocurrencies would give up their holdings, putting further downward pressure on the share price.

Already, investment funds that had invested colossal sums in the hope of converting projected Bitcoin share price increases into quick profits have found themselves bankrupt. Just one of these, Celsius Network, is confirming billions of dollars of investor funds. But large-scale losses threaten not just the prosperity of overly greedy investors, but even global economic stability, with governments around the world considering increasingly brutal measures to strictly control or even ban cryptocurrencies.

The prospect of use for illicit purposes such as money laundering and the invisible transfer of wealth abroad are other serious concerns for nations where the “underground economy” accounts for a significant share of the total. The concept of the underground economy refers to illegal economic activities, with illegal products and services, or with legal products or services obtained through operations involving tax evasion.

If approved by Parliament, the Central Bank of India’s request would de facto ban cryptocurrencies, criminalising the holding, issuance, mining, trading and transfer of crypto-assets.

But even as they prepare to ban Bitcoin and its alternatives, the Indian government is building a legislative framework for an official digital currency whose use can be strictly controlled, preventing its use for speculation or other illegal activities.