India is considering appointing its capital markets regulator to oversee cryptocurrencies, according to people with knowledge of the matter, as authorities look to classify them as financial assets.

Prime Minister Narendra Modi's government, which plans to introduce legislation in the ongoing parliament session, will probably give crypto holders a deadline to declare their assets and meet any new rules, the people said, asking not to be identified as the discussions are private. The bill is likely to use the term ‘cryptoassets' rather than ‘cryptocurrencies,' and won't refer to the central bank's plan to create its own digital currency, one of the people said.

Any violators could be fined as much as Rs 20 crore ($2.7 million) or imprisoned for 1.5 years, according to the proposals, the people said. The government may also consider prescribing a minimum threshold for investing in crypto assets to safeguard small investors, Bloomberg News had reported earlier.

A spokesman for the finance ministry couldn't be immediately reached for comment.

Finance Minister Nirmala Sitharaman said last week the government has reworked an earlier bill — which had proposed banning all private cryptocurrencies — to factor in new developments. There was no proposal to recognize Bitcoin as a currency in the country, she added.

The crypto market in India has grown 641% in the year through June 2021, according to an October report from Chainalysis, a crypto-analysis firm. The government is now considering taxing gains from digital currencies, and there have been calls to impose stricter rules for transactions in virtual coins due to the unregulated nature of the business.

Earlier this month, Modi held a review meeting on digital currency and discussed that unregulated crypto markets can't be allowed to become avenues for money laundering and terror financing.