New Delhi is also planning on setting up a regulator to monitor unregulated exchanges which trade virtual currencies, it was revealed.
Subhash Chandra Garg, economics affairs secretary told CNBC the government is setting up a panel to analyse the cryptocurrency situation and aims to submit a report in the current fiscal year.
Mr Garg, who is heading the panel, said: “The government will take steps to make it illegal as a payment system. As well as having a regulator in place.”
He added: “We hope now within this financial year the committee will finalise its recommendations… certainly there will be a regulator.”
Related articles
Finance minister Arun Jaitley told parliament last week the Indian government does not consider cryptocurrencies legal tender and aims to eliminate use of cryptocurrencies in financing illegitimate activity or as part of a payment system.
Roman Bruskov, editor-in-chief of DeHedge, told Express.co.uk India has every right to fear anonymous digital currencies as the appearance of an untraceable financing resource will be a dangerous precedent for the country’s economy, opening many doorways for corruption to take on new heights and criminal activities to lose all fear of state authorities.
At the end of last year, the government issued a warning that cryptocurrencies were a Ponzi scheme.
However, not all crypto-enthusiasts believe regulation is a bad thing. Steve Giguere, lead EMEA engineer at Synopsys' Software Integrity Group, a company which focuses on the new era of technology said: “It makes sense that stakeholders, in that industry would use their regulatory influence not to stop it, but to slow it and steer it until such time that they can pivot themselves into still being the controlling profit centre for it."