A panel set up by the Indian government is preparing a report that discusses the regulatory framework for digital currencies such as bitcoin in the country, Moneycontrol reported.

There has been an upsurge in the demand for bitcoin in India, particularly after Prime Minister Narendra Modi’s demonetization drive. It has been often reported that the digital currency is sold at a premium in the country.

The panel, comprising of officials from the Finance Ministry, NITI Aayog, Ministry of Information Technology, State Bank of India, and the Reserve Bank of India (RBI), is evaluating the existing international framework on digital currencies and will suggest anti-money laundering and consumer protection measures best suited for the country. The panel has also met with the representatives of domestic digital currency companies.

A senior government official told Moneycontrol:

"We have had five meetings and have consulted all ministries, public, stakeholders (exchanges such as Zebpay and Unocoin). We will submit the report by July-end”.

The official added that one of the crucial tasks for the committee is to fix the accountability for digital currency transactions and a body needs to regulate them.

“SEBI (Securities and Exchange Board of India) can be asked to regulate virtual currencies as transactions are currently done through unregulated exchanges. RBI may step in if the government plans to regulate them or accept them as currency,” the official said.

The panel is considering various options to regulate this emerging sector including the hiring of an agency that would monitor the trading guidelines and finalize the digital currency laws.

"We may monitor these currencies for some time and then see how it progresses. It can then be concluded if at all there is a need for a regulator,” the official said, adding that the probability of legalizing digital currencies is very low.

He further pointed out that banning the use of bitcoin is not easy, particularly as one does not know who is trading or operating it.