Government plans to introduce a law to ban private cryptocurrencies such as bitcoin, according to an agenda listed for discussion during the current session of the Lok Sabha.

A government committee had in 2019 recommended banning all private cryptocurrencies, with a jail term of up to 10 years and heavy fines for anyone dealing in digital currencies.

The RBI has also been warning people not to go in for cryptocurrencies as they are not legal tender like currency notes. These cryptocurrencies are being used by speculators around the world and have seen very wide fluctuations in their value often resulting in huge losses to those who have bought them.

However, while cryptocurrencies are not accepted as legal tender in the country there has always been some confusion on whether it is legal to hold them as there was no law on the subject.

The new legislation would lead to a formal law making even the holding of cryptocurrencies a punishable offence.

The legislation seeks “to prohibit all private cryptocurrencies in India, The panel has, however, asked the government to “consider” the launch of an official government-backed digital currency in India, to function like bank notes, through the Reserve Bank of India.

The RBI had in April 2018 ordered financial institutions to stop dealing with all individuals or businesses dealing in virtual currency such as bitcoin.

But in March 2020, India’s Supreme Court allowed banks to handle cryptocurrency transactions from exchanges and traders. This had resulted in overturning the RBI directive and causing more confusion. Governments around the world have been looking into ways to regulate cryptocurrencies but no major economy has taken the step of completely banning them although there is serious over the disastrous impact that these currencies can have on the financial system.