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India’s Finance Minister Nirmala Sitharaman today addressed Parliament, stating that the Reserve Bank of India (RBI) is seeking a total ban on cryptocurrencies, but believes that global collaboration is necessary to ensure that it is made possible. The Minister said that global cooperation aims to prevent “regulatory arbitrage.”
According to an article published by The Economic Times, Sitharaman said,
Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.
India’s Stance on Cryptocurrencies
India has been vocal about its stance regarding cryptocurrencies, maintaining they should be prohibited given their potential to threaten the country’s financial stability. The governor of the central bank, Shaktikanta Das, said earlier in the year that he considers cryptocurrencies a “big threat” to the stability of his country’s financial system. The central bank has itself repeatedly warned citizens of the security risks of dealing with cryptocurrencies and has compared them with Ponzi scams. Despite the warning from its authorities, crypto investments in the country have flourished, growing a massive 641% between July 2020 and June 2021. However, uncertainty surrounding the industry has been crippling investors, with many demanding regulatory clarity. Therefore, when Minister Sitharaman announced a 30% crypto tax during the Budget Speech 2022, most of the industry welcomed the taxation, with many believing it would provide much-needed clarity in the sector.
During the session in Parliament today, Minister Sitharaman again raised concerns over the industry, citing issues such as speculation while ruling out the possibility of cryptocurrencies being used as a currency because the central bank does not issue them. She said,
Further, the value of fiat currencies is anchored by monetary policy and their status as legal tender. However, the value of cryptocurrencies rests solely on the speculations and expectations of high returns that are not well anchored.
There has been some speculation that the government would introduce a bill on crypto regulation, but no indication of such a bill has been given. The Finance Minister has said the RBI has recommended framing legislating on the cryptocurrency sector, and in its view, cryptocurrencies should be prohibited. She added,
This is in view of the concerns expressed by RBI on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.