India to Outlaw Bitcoin

The Indian government plans to outlaw cryptocurrencies such as Bitcoin. The measure is expected to become law, though it's unclear if it will be enforceable in practice.

Politicians in the country have long been hostile to cryptocurrencies, which use blockchain technology. That's where all transactions are recorded on a digital "ledger" which exists as multiple copies across the Internet, removing any central control.

India's government previously banned "real world" financial institutions from providing any services to cryptocurrency operators, for example in exchanging the virtual currencies for traditional money. That was struck down by the country's Supreme Court, which said such a ban wasn't legitimate while cryptocurrencies themselves remained legal.

The government has now proposed a law that would completely outline any activity related to cryptocurrency. This would make it illegal simply to own any units of cryptocurrency. (Source: arstechnica.com)

Mining Outlawed

The ban would also cover mining. That's where people donate their computer's resources to verify transactions for the blockchain. They are motivated to do so by the prospect of being rewarded with payments of the cryptocurrency itself.

The full details of the proposed law aren't public yet, but it reportedly includes a six month grace period for citizens to sell off their holdings before enforcement begins.

Given the government's strong majority in the country's legislature, it appears very likely the bill will become law.

Blockchain Still Legal

Officially the government is passing the law to protect citizens from "investing" in cryptocurrencies and risking significant losses as their value against traditional currencies fluctuates wildly. More cynical observers suggest the ban is more about restricting the options for tax evaders to hide their financial activity.

Actually enforcing the ban may be tricky. One of the main characteristics of cryptocurrencies is that although every transaction is a matter of public record, the "real world" identities of those involved can be kept secret.

The law wouldn't affect blockchain technology itself. That has many uses other than for virtual currencies. For example, it can be used to track components and products in a supply chain, making it easier to track down end units that may have been affected by a faulty or contaminated batch of components or ingredients. (Source: reuters.com)

What's Your Opinion?

Would you like to see a similar ban in your own country? Does the proposed law go too far? Can individual countries successfully legislate over online technologies?