Indian finance minister vows cryptocurrency crackdown
Indian finance minister Arun Jaitley has promised a crackdown on the use of cryptocurrencies such as bitcoin for illicit purposes, stressing the government does not consider them to be legal tender.
“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 during today’s budget speech, as the government outlined measures to revive the country’s flagging growth rate.
Bitcoin prices on Indian exchanges have been consistently higher than those prevailing internationally. This premium is due largely to India’s capital control system, which makes it difficult for Indians to buy bitcoins abroad, and for foreigners to take advantage of the high Indian prices, according to Sathvik Vishwanath, founder of Indian bitcoin platform Unocoin.
A report last October from the US Drug Enforcement Administration said that bitcoin was being used increasingly to transfer money across international borders, evading capital controls.
Bitcoin trading has surged in India in recent months, with users drawn by a spike in prices late last year, Mr Vishwanath told the Financial Times last week. “Early last year we were gaining about 10,000 new users each month,” he said. “In December it was about 7,000 to 8,000 each day.”
The surge in bitcoin’s popularity in India has come despite repeated government attempts to urge caution.
“The price of bitcoin and other [cryptocurrencies] is entirely a matter of mere speculation resulting in spurt and volatility in their prices,” the finance ministry said in December, warning investors against the potential for huge losses and security breaches.
“They are also likely being used to carry out illegal/subversive activities, such as terror funding, smuggling, drug trafficking and other money-laundering acts,” it added.
Last month the Economic Times, a domestic newspaper, reported that banks had frozen accounts belonging to several prominent Indian bitcoin platforms.
Despite his strong words against cryptocurrencies on Thursday, Mr Jaitley said the government would explore applications of the blockchain technology that underlies them. Fostering advances in financial technology has become a flagship project of Prime Minister Narendra Modi’s administration, which has been trying to reduce what it considers an unhealthy reliance on cash transactions.