- RBI aims to prohibit cryptocurrencies, said India’s Finance Minister.
- RBI denies crypto as a currency, states currencies can only be issued by central banks or governments.
- India has more than 100 million crypto investors and these laws are impacting trades every day
India’s Union Minister of Finance, Nirmala Sitharaman, stated that the Reserve Bank of India (RBI) has expressed concerns about the destabilizing impacts of crypto on the fiscal stability of the country.
In this regard, RBI holds the opinion that cryptocurrency should be banned. The Indian government looks forward to “global collaboration” if such a ban is effectively implied, added Sitharaman.
The statement has been circulating over social media, with notable financial experts re-posting the document.
While addressing a series of crypto-related questions asked by a Member of Parliament, Thirumaavalavan Thol, at the Lok Sabha on July 18, Sitharaman dropped the news that RBI is of the view that crypto should be prohibited.
She further stressed that cryptocurrencies are “borderless & require international collaboration to prevent regulatory arbitrage. Therefore any legislation for regulation or banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.”
Moreover, Sitharaman enunciated RBI has mentioned that cryptocurrencies are not actual currencies, as modern currency can only be issued by central banks or governments.
Further, the value of fiat currencies is anchored by monetary policy and their status as legal tender. But the value of cryptocurrencies rests solely on the speculations and expectations of high returns that are not well-anchored.
This comment came as a bombshell for the crypto industry as the government’s consultation paper on crypto is awaited. The Indian crypto community, which has over 100 million investors, speculated that the government could introduce a legislative framework to regulate the crypto sector in the Monsoon Session of Parliament. However, no such bill has been listed for introduction yet.
The government refused to announce its stance on crypto so far, citing a lack of clarity reigning over its classification, whether it’s a financial asset or a commodity. Meanwhile, Finance Minister Sitharaman and Prime Minister Modi have called for joint global action to deal with the problems generated from crypto usage.
India has already imposed a strict taxation regime on gains from virtual assets. The 30% tax rate on all cryptocurrencies without any exemption or deduction in Union Budget has been implied since April 1, 2022.
In the latest addition, any buyer of the virtual assets will have to pay 1% TDS and possible inclusion in the GST range from July 1, 2022. This has heavily impacted the trading volumes on crypto exchanges in the country.