A proposed Indian bill would ban the use of crypto assets for payment purposes, and those who violate the law will be arrested without a warrant and held without bail, Reuters has learned from a source.
In September, China announced that it was intensifying its crackdown on cryptocurrencies, and the Narendra Modi government has previously hinted at a ban on most crypto assets.
Specifically, the Indian government plans to prohibit the use of digital currencies as "a medium of exchange, as a store of value, or as an accounting unit" in the country.
Contravening these rules is also "cognizable," so a warrantless arrest is possible, and bail is not available.
Sources who have direct knowledge of the matter declined to identify themselves and refused to speak to reporters. An email to the ministry for comment was not returned.
Despite the government's stated aim to promote blockchain technology, lawyers said the proposed law would also damage its use and the non-fungible token market in India.
A government crackdown on cryptocurrency trading led to a frenzy in the market and investors lost significant amounts of money.
In India, the number of investors in crypto assets has surged as a result of advertisements and rising prices.
Despite the lack of official data, industry estimates suggest that there are around 15-20 million crypto investors in India and that the total value of crypto assets in the country is about 450 billion rupees ($6 billion).
A draft summary of the bill and a source indicate that the government plans to crack down heavily on advertisements that entice new investors.
According to the source, people who store digital currencies outside exchanges will also likely be forbidden to use self-custodial wallets.
This is because the central bank is gravely concerned about digital currencies and aims to put safeguards in place to protect the traditional financial sector from cryptocurrencies, according to the draft summary of the bill.
According to the draft summary, crypto assets will be regulated by the Securities and Exchange Board of India (SEB).