India has announced it is banning the use of cryptocurrencies like bitcoin as a medium of payment.
The country’s finance minister, Arun Jaitley, made the comments during the annual budget speech yesterday.
“The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these cyrptoassets in financing illegitimate activities or as part of the payments systems.”
With India looking down to crack down on cryptocurrencies, this is a big issue for the market. The country is responsible for one in 10 bitcoin transactions worldwide.
Bitcoin is already having a bad week. The crypto coin is down 20 percent in the last three days. It’s only just recovered from the rumours that South Korea would be banning trading. Another country-wide ban would not be a good sign.
Why is India banning cryptocurrencies?
India has been trying to crack down on cryptocurrencies in the market for a while. Last year, its income tax department began investigating people who were not paying tax on the money they made from bitcoin.
The department was reportedly looking into around 500,000 investors in the country.
It all goes back to the prime minister Narendra Modi’s efforts to curb corruption in India. This started with his decision to ban two of the country’s largest banknotes in a demonetisation policy in November 2016.
Despite the government’s aversion to bitcoin, late last year the country was reportedly thinking about issuing its own digital currency. Sources say the Indian cryptocurrency would be named Lakshmi, and government officials were considering implementing the currency. The Lakshmi would be backed up by blockchain.
The government made no mention of an Indian cryptocurrency yesterday. However, it did reveal that is interested in blockchain technology. Jaitley said:
“The government will explore use of blockchain technology proactively for ushering in the digital economy.”
This follows the trend of other countries using the blockchain to store data and create smart contracts. In Europe in particular, it’s becoming more widespread with countries such as Ukraine and Estonia taking advantage of the technology.