Finance Minister Nirmala Sitharaman stated that the Reserve Bank of India (RBI) wants the government to ban the regulation of cryptocurrencies. The RBI has suggested to the government prohibit the regulation of cryptocurrencies. However, the Indian government wants international support to discuss further banning crypto effectively, said Sitharaman.
In response to questions on cryptocurrencies in the Lok Sabha today, the Finance Minister stated that the RBI has proposed the creation of legislation in this area. The RBI believes that cryptocurrency should be outlawed.
She continued, "By definition, cryptocurrencies are global, and international coordination is required to prevent regulatory arbitrage." "As a result, any law for regulation or prohibition may be successful only after extensive international collaboration on risk-benefit analysis and the establishment of common taxonomy and standards," she added.
To a question about whether the RBI has issued instructions, circulars, directions, warnings, etc. over the last ten years restricting the issuance, buying, selling, holding, and circulation of cryptocurrency in India, the Finance Minister responded, "RBI has been cautioning users, holders, and traders of Virtual Currencies (VCs) via public notices on December 24, 2013, February 01, 2017, and December 05, 2017, that dealing in VCs is associated with potential economic, financial, and political risks." In addition, on April 6, 2018, the RBI issued a circular barring its regulated firms from dealing in virtual currency (VCs) or providing services to assist any person or company in dealing with or settling VCs."
She went on to say that the RBI, in a circular dated May 31, 2021, has also advised its regulated entities to continue carrying out customer due diligence processes for VC transactions, following regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating Financing of Terrorism (CFT), obligations under the Prevention of Money Laundering Act (PMLA), 2002, and so on, in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
"The RBI stated that cryptocurrencies are not currencies since any contemporary currency must be issued by the Central Bank / Government." Furthermore, the value of fiat currencies is anchored by monetary policy and their legal tender status, whereas the value of cryptocurrencies is solely based on speculations and expectations of high returns that are not well anchored, so it will have a destabilizing effect on a country's monetary and fiscal stability," she added while speaking at the Parliament's Monsoon Session.
The central bank has often said that digital assets are an issue. In the RBI's annual report, RBI governor Shaktikanta Das called cryptocurrencies an "obvious hazard," saying that anything that draws value from make-believe, "without any foundation," is essentially speculation disguised as a fancy moniker.
Meanwhile, the government announced a tax on virtual asset gains. The 30% tax rate on virtual currency assets went into force on April 1, and the latest addition was 1% TDS on July 1, this year. This has had an effect on trade volumes on Indian bitcoin exchanges.