India drafts legislation to ban private cryptocurrencies like Bitcoin and develop a national coin

Governments everywhere are starting to get edgy, neigh freaked out, about the fact that new technologies and an increasingly digital and connected world mean that for the first time in human history companies are, arguably, more powerful than they are. Prime examples of this trend include the emergence of so called virtual nations, the launch of Facebook’s Libra cryptocurrency which, according to most central banks would have “ended state control of money,” and their undeniable influence on everything from democracy to the transformation of entire industries.

Now, trying to address another challenge to the state’s authority, namely blockchain and bitcoin, which both allow consumers to bypass traditional controls in new ways, India’s government has announced that it plans to introduce a bill in the country’s lower house that would ban private cryptocurrencies such as bitcoin and, like the EU just announced, let the country create a national cryptocurrency.

The so called “Cryptocurrency and Regulation of Official Digital Currency Bill” moves “to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India.”

Additionally, “the bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”

Fronted by Prime Minister Narendra Modi, the right-wing Bhartiya Janata Party currently have control of India’s two houses of Parliament, the Lok Sabha and the Rajya Sabha, giving the legislation a strong possibility of passing.

Bitcoin’s value jumped more than 20 percent to $48,566 on Friday after Elon Musk changed his personal Twitter bio to #bitcoin.

This is not the first time Indian lawmakers have taken such a strong position on cryptocurrencies. In 2018, an Indian government panel recommended banning all private cryptocurrencies and proposed up to 10 years of jail time for offenders.

That same year, India’s then-finance minister Arun Jaitley said: “The government does not recognize cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system.”

India’s monetary policy regulator temporarily banned crypto transactions after a string of fraudulent activity in 2018, but the policy was later overturned by India’s Supreme Court in March 2020.

Many countries, including the US, China, Japan, Canada, Venezuela, Estonia, Sweden and Uruguay — have explored developing digital currencies of their own. However, there are significant differences between national digital currencies and private cryptocurrencies such as bitcoin. Cryptocurrencies such as bitcoin are decentralized, while national digital currencies are typically centralized.

With a GDP of nearly $2.9 trillion, India is the world’s fifth-largest economy, ahead of the United Kingdom, France and Italy, according to The World Bank.

And while foreign investment decreased overall in 2020, India was one of the only major economies in the world to record an increase. The United Nations Conference on Trade and Development estimates that foreign direct investment in India jumped 13 percent in 2020 compared to 2019.