Major cryptocurrencies rose on Wednesday morning, even as India said it will introduce a new bill that would see it banning the majority of digital currencies.
Bitcoin (BTC-USD) was up almost 1% to trade at $56,790 (£44,729). Ethereum (ETH-USD), the world’s second biggest crypto according to market capitalisation, was up roughly 4% and was trading at $4,294.
India's Cryptocurrency and Regulation of Official Digital Currency Bill 2021 proposes the creation of a central bank digital currency (CBDC) to be issued by the Reserve Bank of India.
The central bank, which has voiced concerns about private crypto, is set to launch its CBDC by December.
The bill also “seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” according to a bulletin on the Indian parliament’s website.
Watch: India's Crypto Ban, Nigeria's Crypto Crackdown and El Salvador's Bitcoin Ambition
"These exceptions can be anything – it might just be the roadmap for another finance bill that will bring cryptos under the tax ambit from the next financial year that starts from April 1, 2022; or it may allow trading in high market cap and relatively stable cryptos like bitcoin and ether, but ban hyper volatile assets like meme currencies," Kunal Sawhney, CEO of equities research firm Kalkine Group told Yahoo Finance UK.
Read more: Live crypto prices
"It may also be about India's central bank – using the underlying blockchain technology to create its own official version of digital rupees," he said, adding "as of now, the synopsis document has just triggered speculations."
He believes India may not go to the China way of "blanket prohibition of the cryptocurrency space" given the mainstream attention cryptos are getting around the world: El Salvador now accepts bitcoin as legal tender and the US Securities and Exchange Commission has green-lighted a bitcoin exchange traded fund.
But he said "if at all the ban does come, it will have big repercussions considering India is a major emerging economy and a member of the UN and the G20. Other major economies such as the US will then face pressure to clarify their stance on these volatile assets."
Sawhney also said inflation, which is managed by using monetary policy by the central bank, is a big issue in India as well – "may be the government wants to nip the threat private currencies pose to monetary policy management in the bud."
Earlier this month, Indian prime minister Narendra Modi said all democratic nations must work together to ensure cryptocurrency "does not end up in wrong hands, which can spoil our youth". These were his first public comments on the subject.
The government has in the past considered criminalising the possession, issuance, mining, trading and transference of crypto assets. The new rules could also discourage the marketing and advertising of cryptocurrencies.
Meanwhile the price of bitcoin was up at the time of writing but had fallen to its lowest rates since mid October on Tuesday evening when its value fell to $55,460
This was also a 20% fall from its all-time high of nearly $69,000 that it reached earlier this month.
Naeem Aslam, chief market analyst at Ava Trade, noted that "in the last 100 days, the correlation between the S&P 500 (^GSPC) and bitcoin has risen to 0.33, implying that when the S&P 500 falls in value, bitcoin will likely fall in value as well, and vice versa."
"The recent selling spree in crypto markets is tied to investors' moving away from risky assets and growth stocks to safer investments until there is some stability in financial markets, not just in the US but across the globe."
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