Regulation
Cryptocurrency: RBI seeks ban, but India needs global support to regulate it, says Finance Minister Nirmala Sitharaman
Finance Minister Nirmala Sitharaman said the Reserve Bank of India (RBI) has recommended the government to come up with regulations for cryptocurrencies. The Indian government wants international collaboration if such a ban is to be implemented, Sitharaman said.
Responding to questions related to cryptocurrency in the Lok Sabha today, the Finance Minister said that the RBI has recommended framing of legislation on the sector. The RBI is of the view that cryptocurrencies She added that cryptocurrencies are by definition borderless and require international collaboration to avoid regulatory arbitrage. “Therefore, any legislation aimed at regulating or prohibiting these cryptocurrencies can only be effective after meaningful international collaboration on assessing the risks and benefits and evolving a common taxonomy and standards,” she said.
In response to a question whether the RBI has issued any instructions, circulars, guidelines, warnings, etc. regarding the restriction of issuance, purchase, sale, holding and circulation of cryptocurrencies in India in the last ten years, the Finance Minister replied, “The RBI has cautioned users, holders and traders of virtual currencies (VCs) through public notices on December 24, 2013, February 1, 2017 and December 5, 2017 that trading in VCs is associated with potential economic, financial, operational, legal, customer protection and security risks. The RBI has also issued a circular on April 6, 2018 prohibiting its regulated entities from dealing in VCs or providing services to facilitate any person or entity in dealing or settling VCs.”
She added that the RBI, vide its circular dated May 31, 2021, has also advised its regulated entities to continue implementing customer due diligence processes for VC transactions in line with regulations governing Know Your Customer (KYC), Anti-Money Laundering (AML), Combating Financing of Terrorism (CFT) norms, obligations under the Prevention of Money Laundering Act (PMLA), 2002, etc. besides ensuring compliance with relevant provisions of the Foreign Exchange Management Act (FEMA) for overseas remittances.
“RBI has mentioned that cryptocurrencies are not a currency as every modern currency has to be issued by the Central Bank/Government. Also, the value of fiat currencies is anchored by monetary policy and their status as legal tender, but the value of cryptocurrencies is based solely on speculations and expectations of high returns which are not well anchored, which will have a destabilising effect on the monetary and fiscal stability of a country,” she added during her speech in the monsoon session of Parliament.
The central bank has repeatedly highlighted the problems with digital assets. Calling cryptocurrencies “a“ger”, RBI Governor Shaktikanta Das The RBI’s annual report says that anything that derives its value from fiction, “without any underlying element”, is just speculation under a fancy name.
In the meantime, the government has announced a tax on winnings from virtual assetsThe 30% tax rate on virtual currency assets came into effect from April 1 and the latest addition is the 1% TDS since July 1 this year. This has impacted the trading volumes on cryptocurrency exchanges in India.
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