Any violation, the cabinet note said, will result in imprisonment of up to one-and-a-half years with a penalty in the range of 5 crore rupees ($667,500) to Rs20 crore. In case of any terror-related activities, the provisions of the Prevention of Money Laundering Act will apply with suitable amendments, NDTV reported.

While there is no official data on cryptocurrency holders in India, industry estimates hint at up to 20 million investors holding around Rs40,000 crore in all.

The government’s concerns over cryptos

On Nov. 30, during the winter session of parliament, finance minister Nirmala Sitharaman flagged the potential for fraudulent activities using digital tokens and said they were being monitored.

Another concern is the emergence of products related to virtual tokens—similar to chit funds, multilevel marketing for direct sales, and systematic investment plans.

Responsible advertising must necessarily disclose the inherent risks, ensuring that people do not mistake crypto assets as legal tender, said Manisha Kapoor, general secretary of Advertising Standards Council of India.

Sitharaman also said the government had no proposal to recognise bitcoin as a currency.

While the Reserve Bank of India’s digital currency is in the works, issues related to cryptocurrency, too, will fall under its purview. The government has reportedly received a proposal from the central bank to include them in the definition of a “bank note.”

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