Finance Minister Arun Jaitley during the budget presentation 2018 stated that the Indian Government will discourage the use of cryptocurrencies mentioning their use for illegal activities. Here’s the official statement:
Distributed ledger system or the blockchain technology allows organization of any chain of records or transactions without the need of intermediaries. The Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. The Government will explore use of blockchain technology proactively for ushering in digital economy.
However, he also said that the government is open to the utilisation of blockchain technology. Jaitley had already said that the cryptocurrencies will not be considered as legal tender in India. He also added that no protection will be available to those who are using them or dealing in them. This move from the government is considered as the initial mesaures to regulate the use cryptocurrencies in order to avoid security issues and other fraudulent activities.
The Registrar of Companies no longer approves the registration of companies that are providing cryptocurrency exchange services. Also, most banks don’t support cryptocurrency exchanges in India.
The use of cryptocurrencies by criminals attracted the attention of financial regulators, legislative bodies, law enforcement and the media all over the world. There were also fake news and apps in the name of Jio coin in India. Recently, Bitcoin, one of the popular cryptocurrencies, hit an all-time high exchange rate of nearly $20000. But the exchange rate is not stable at all such that it dropped below $10000 within a month.
Because of the decentralized nature of cryptocurrencies, nations cannot shut down the network like demonetizing banknotes. However, the use of cryptocurrencies could be discouraged and even be criminalized. The legal status of cryptocurrencies vary from nation to nation. While some nations have explicitly allowed its use and trade, others have banned or restricted it. With this new announcement from the Indian Government, the future of cryptocurrencies in India doesn’t seem bright.