India to bar cryptocurrencies from its payments system: Finance ministry official

HIGH FEES | The average fee paid to process bitcoin transactions has soared over the past year, outpacing even the staggering price increase of the cryptocurrency itself. Each bitcoin transaction now costs around $7.30 to process, up from around 30 cents at the start of the year, according to trade website BitInfoCharts.

India is planning steps to ensure cryptocurrencies are illegal within its payments system, while at the same time appointing a regulator to oversee unregulated exchanges that trade in “crypto assets,” a finance ministry official said.

A panel set by the government to look into issues relating to cryptocurrencies is expected to submit its report in the current fiscal year, ending on March 31, S.C. Garg, Economic Affairs Secretary, told CNBC TV18 news channel.

“The government will take steps to make it illegal as a payment system,” he said at a post-budget event telecast by the news channel, adding the trading of “crypto assets” at the unregulated exchanges would be regulated.

“We hope now within this financial year the committee will finalise its recommendations … certainly there will be a regulator,” Garg, who is heading the panel, said.

The government does not consider cryptocurrencies legal tender and will take all measures to eliminate use of crypto assets in financing illegitimate activities or as part of payment system, Finance Minister Arun Jaitley told parliament while presenting his annual budget last week.

The Indian government has issued repeated warnings against digital currency investments, saying these were like “Ponzi schemes” that offer unusually high returns to early investors.

But it has not so far imposed curbs on an industry estimated to be adding 200,000 users in India every month.

Ajeet Khurana, president of Block Chain and Cryptocurrency Committee, an industry body, said the decision to regulate crypto exchanges was good news.

Nishith Desai, head at Zebpay, India’s largest bitcoin exchange, said the exchanges would cooperate with the government in framing the regulations.