India to ban cryptocurrency payments: source

MUMBAI: Legislation that would ban the use of cryptocurrencies as a method of payment in India is intended to make those who infringe the law subject to arrest without a warrant and be held without bail, according to a summary of the Bill seen by Reuters.

Prime Minister Narendra Modi has previously flagged that it plans to ban most cryptocurrencies - a move that came after measures by China this September that intensified its crackdown on cryptocurrencies.

The Indian government is planning to prohibit all activities by any individual on mining, generating, holding, selling or dealing in digital currencies as a medium of exchange, store of value, and a unit of account, which means an arrest without a warrant is possible, and is not bailable, according to the summary of the Bill.

The source, who has direct knowledge of the matter, was not authorised to speak to media and declined to be identified. The proposed law will also deal a blow to its use as well as the non-fungible token market in India, according to lawyers.

If no payments are allowed at all and an exception is not made for transaction fee, it will effectively stop NFT, said Anirudh Rastogi, founder of law firm Ikigai Law.

Several investors exited with significant losses due to the government's plans to crack down heavily on criptocurrency trading.

The number of investors in cryptocurrencies has gone up in India after being hit by a barrage of advertisements and rising prices for cryptocurrencies.

The bill and the source say that there are about 15 million to 20 million investors in the country, with total holdings of roughly 450 billion Indian rupees US $6 billion. The government plans to come down heavily on advertisements that seek to woo new investors, despite the lack of official data.

The source said that self-custodial wallets that allow people to store digital currency outside exchanges are likely to be banned.

The bill says that the central bank's concerns about digital currency and the intention to put safeguards in place to ring-fence the traditional financial sector from cryptocurrencies are the main reasons for the tough new regulations.

The draft summary said that the Securities and Exchange Board of India SEBI will be the regulator for cryptocurrencies.