Bitcoin craze hits roadblock: 7.5 million investors in panic

The Indian government does not welcome Bitcoin, but wants to promote digital rupee

After US President Biden signed the $1.9 trillion economic stimulus bill, the optimism in the financial market continued to push the price of Bitcoin to $60,000. On March 14, Bitcoin once exceeded $61,000 per coin, and although it fell back, it still remained above $60,000.

But over the weekend, the high-flying Bitcoin encountered a roadblock. According to a Reuters report on March 14, local time, a senior government official revealed that the Indian government will propose a bill to ban cryptocurrencies.

Cryptocurrency has been "targeted" by the Indian government.

The official said the bill would be one of the strictest policies against cryptocurrencies in the world, criminalizing the holding, issuance, mining, trading and transfer of crypto assets.

If the bill becomes law, India would become the first major economy to make holding cryptocurrencies illegal.

After the above news was released, Bitcoin quickly plunged, falling by more than 3%, and the price fell by more than $2,000, once on the verge of falling below $59,000. As of press time, Bitcoin was trading at $60,324.7, up 2.05%.

Indian government: Bitcoin is not welcome, but digital rupee is promoted

In fact, this is not the first time that the Indian government has taken such a tough stance on private cryptocurrencies.

As early as 2018, some people in the Indian government suggested banning all private cryptocurrencies and sentencing traders to up to 10 years in prison. The then Indian Finance Minister Jaitley said: "The government does not recognize cryptocurrencies as legal tender or coins, and will take all measures to eliminate the use of these crypto assets for illegal activities or as part of the payment system."

That year, there were many fraud cases involving cryptocurrencies in India, which prompted India's monetary policy regulator to temporarily ban cryptocurrency trading, but the policy was later overturned by the Indian Supreme Court in March 2020.

Indian rupee notes and coins. (Source: ambcrypto.com)

Since then, Indian investors' enthusiasm for Bitcoin has rebounded as the price of the currency has risen. In January this year, the Indian government plans to submit a "Cryptocurrency and Official Digital Currency Bill" to the parliament, requiring the ban of private cryptocurrencies (such as Bitcoin) and the establishment of an official digital currency framework called "Digital Rupee", which aims to provide a convenient framework for the creation of an official digital currency issued by the Reserve Bank of India (RBI).

It is worth mentioning that since Indian Prime Minister Modi’s party has an advantage in both the upper and lower houses, once the details of the bill are confirmed, it will most likely pass the legislative process smoothly.

In this regard, billionaire Jinjunwala, known as the "Indian Buffett", also expressed his approval. According to CNBC, he believes that Bitcoin is "the highest level of speculation", he will never buy Bitcoin, and the Indian government should intervene and ban Bitcoin while promoting the digital rupee.

Indian government officials who broke the news to Reuters pointed out that the bill will promote blockchain technology while banning private cryptocurrency assets. According to them, the bill is currently tentatively scheduled to give cryptocurrency holders up to six months to liquidate, after which fines will be imposed on those who still hold them.

Indian Finance Minister Sitharaman's attitude towards Bitcoin has attracted great attention from the market. (Source: BITCOIN.COM)

But perhaps in order to ease market concerns, Indian Finance Minister Sitharaman came out to clarify recently. According to the Economic Times of India, she said in an interview, "The proposed cryptocurrency ban is not to close all cryptocurrency windows. We have not stopped discussing it, but are looking for ways to experiment with cryptocurrencies."

Indian Bitcoin Players: “Greed Outweighs Fear”

Although the Indian government has repeatedly threatened to ban Bitcoin, as cryptocurrencies have skyrocketed, the greed of Indian investors has overcome the fear of a ban.

Despite news of the ban, CNBC cited industry data to estimate that Bitcoin trading volume in India is increasing, with millions of Indian investors currently holding cryptocurrency assets worth about 100 billion rupees ($1.4 billion).

Bitcoin investment enthusiasm in India remains high. (Source: Bloomberg)

According to statistics from blockchain media ambcrypto.com, after the Indian Supreme Court overturned the previous trading ban in March 2020, Indian companies with cryptocurrency services as their core business have sprung up like mushrooms after a rain.

As of March 2021, India’s cryptocurrency industry has around 342 businesses, nearly $1.39 billion inflow, nearly 7.5 million active traders, and the country’s average trading volume has also increased by 500%.

Meanwhile, Dahak, CEO of Bitbns, a local cryptocurrency exchange in India, said that the number of user registrations and capital inflows on the platform have increased 30 times compared to a year ago. Unocoin, the earliest cryptocurrency exchange in India, also added about 20,000 users in January and February this year.

Regarding this investment boom, Sanghvi, an investor who started betting on digital currency last year, may represent the attitude of a large number of Indian Bitcoin investors. He told Reuters: "If the ban is officially implemented, we must comply. But before that, I would rather compete with the market than panic and sell."

Investor Sarodka also said: "The value of cryptocurrencies is increasing rapidly every month, and no one wants to wait and see. Although people may be panicked by the ban, greed is still driving them to make choices."

Not only that, many people believe that the Indian government will not make a "one-size-fits-all" decision that would harm the interests of domestic investors out of the mentality of "the law does not hold everyone responsible."

Regarding the proposed ban, the Internet and Mobile Association of India (IAMAI) publicly stated last week that cryptocurrencies and digital rupees can coexist, and there is no need for the Reserve Bank of India to ban Bitcoin in order to launch the digital rupee.

An IAMAI spokesperson claimed that “more than 300 startups involved in cryptocurrencies have created tens of thousands of jobs and hundreds of millions of dollars in revenue and taxes. The proposed ban will undoubtedly cause nearly 10 million Indian investors to lose their property. Therefore, we urge the government to redefine the cryptocurrency regulatory framework after proper consultation with IAMAI and stakeholders, rather than directly implement a ban.”