Bitcoin drops 10% after Indian government proposes new crypto ban

Today, Bitcoin dropped more than 10% after the Indian government proposed legislation for banning Bitcoin, according to Reuters. The government already had plans to ban cryptocurrencies since January — but now it’s become clear that the goal is to strictly regulate profiting with Bitcoin, which includes holding or trading.

$1 Billion in Positions Liquidated

According to Lark Davis, at least $1 billion in positions were liquidated globally following the news. The sell-offs were registered mainly in exchanges like Binance, Bybit, and Kraken.

Bitcoin fell below $55,000, turning its previous resistance into support. While the event hit the market negatively, the bullish sentiment remains strong.

“Not a Complete Ban” for Bitcoin in India 

While the news of a total crypto ban in India this morning spread fear in the market, India’s Finance Minister, Nirmala Sitharaman, stated that there’s still a “small window of opportunity” for Bitcoin. Accordingly, the government will spread the implementation of blockchain technology and “experimenting” with Bitcoin.

“From our side, we are very clear that we are not shutting all options. We will allow a certain amount of a window for people to experiment on blockchain and Bitcoin.”

Companies are allowed to explore and integrated blockchain technology, as well as using cryptocurrencies to make transactions. One use case could be for companies and banks using Ripple’s ODL (On-Demand Liquidity) with XRP to make cross-border transfers.

While there might not be a complete ban, trading Bitcoin will be illegal. As reported, traders and miners can expect heavy penalties for using cryptocurrencies.

The Confusion for crypto-holders

While Sitharaman stated that there will not be a “complete ban”, the situation has confused the entire crypto-community. Although, one way to address this confusion is by understanding the never-ending conflict between the RBI (Reserve Bank of India) and the government.

The Reserve Bank of India and the official government are known for clashing frequently when it comes to the economic decisions of the country. On the one hand, the Reserve Bank is seeking the issuance of its own CBDC (Central Bank Digital Currency), but cryptocurrencies like Bitcoin have been frowned upon by the institution.

In 2018, the RBI imposed restrictions on banks dealing with cryptocurrency exchanges. But later in 2020, the Supreme Court of India overturned those restrictions.

The cabinet will pass the bill to government officials by the end of the month, and users will have at least six months to sell their funds or face penalties for the illegal use of cryptocurrencies.