India is all set to ban private cryptocurrencies with the government announcing this week that it will bring forward legislation to regulate virtual currencies as the South Asian country's central bank plans to launch its own digital currency.

According to a parliamentary bulletin, "The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021" will be introduced by the government during the winter session of the parliament that is scheduled to begin later this month.

The proposed bill aims "to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India (RBI)," reads the bulletin, adding: "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."

The development comes after Indian Prime Minister Narendra Modi last week warned that cryptocurrencies such as Bitcoin present a risk to the younger generation.

"It is important that all democratic nations work together on this and ensure it (cryptocurrency) does not end up in wrong hands, which can spoil our youth," Modi had said last Thursday at an economic forum in New Delhi.

In September, El Salvador became the first country to accept a cryptocurrency, Bitcoin, as legal tender. But major economies have constantly been suspicious of digital currencies. India's proposed ban is the latest such move from a major emerging economy, after China earlier this year banned all cryptocurrency transactions. 

The RBI, which is preparing to launch its own digital currency, had earlier voiced "serious concerns" about private cryptocurrencies such as Bitcoin, Litecoin and Ehereum. RBI governor Shaktikanta Das said the bank had "serious concerns from the point of view of macro-economic and financial stability," and that blockchain technology can thrive without cryptocurrencies.

Cryptocurrencies first entered the Indian market in 2013 and have been under scrutiny by regulators from the beginning. A spike in fraudulent crypto transactions following the Modi government's decision to demonetize nearly all banknotes in 2016 led to the RBI, India's central bank, banning crypto transactions in April 2018.

The RBI ban was overturned by the Supreme Court of India in March 2020, following which the crypto market in Asia's third-largest economy witnessed a rapid boom, growing over 600 percent in the past year, according to a study by Chainalysis.

The exact number of cryptocurrency owners in India is not known but industry estimates put it between 15 and 100 million people, with total holdings in billions of dollars. The proposed ban is bound to trigger panic among crypto owners. Cryptocurrency prices dropped on Indian exchanges after the decision on the bill's future was announced.