India vows to eliminate use of cryptocurrencies

 India will move to stamp out use of cryptocurrencies, which it considers illegal, Finance Minister Arun Jaitley said on Thursday, launching a no-holds-barred attack on virtual currencies such as Bitcoin.

Governments around the world are grappling with how to regulate cryptocurrency trading, and policymakers are expected to discuss the matter at a G20 summit in Argentina in March.

“The government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system,” Jaitley told parliament in his annual budget speech.

However, the minister said, the government would explore use of block chain technology proactively to speed the move toward a digital economy.

Jaitley’s announcement could trigger “panic selling” in cryptocurrencies in India, said Amit Maheshwari, partner at tax consultants Ashok Maheshwary & Associates LLP.

Bitcoin prices peaked at more than $ 19,600 last month, but have nearly halved in value since, damped by fears that regulators could clamp down on the cryptocurrency in a bid to curb speculation.

Last month, India’s income tax authorities said they sent notices to tens of thousands of people dealing in cryptocurrency such as Bitcoin after a nationwide survey revealed transactions of more than $ 3.5 billion over a 17-month period.

In December, Jaitley’s ministry warned cryptocurrency investors, likening such investments to Ponzi schemes.

“The choice to invest in Bitcoin and other cryptocurrencies will be open to end users, the government is taking proactive measures to curb fraud and illicit transactions,” said Kartik Shinde, a partner at consultancy EY India.