Crypto Ban | Nirmala Sitharaman: RBI bats for crypto ban, govt seeks global collaboration for better implementation: FM Sitharaman

Addressing queries pertaining to cryptocurrencies in the Lok Sabha today, finance minister Nirmala 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.”

The RBI has time and again pointed out the problems with digital assets questioning their underlying fundamentals and use cases. The RBI governor Shaktikanta Das has gone on the record to even call it a “real danger” in the annual report of the central bank.

In the foreword to the 25th issue of the Financial Stability Report (FSR) released on June 30, Das also said as the financial system is getting increasingly digitalised, cyber risks are growing and need special attention.

“We must be mindful of the emerging risks on the horizon. Cryptocurrencies are a clear danger. Anything that derives value based on make believe, without any underlying, is just speculation under a sophisticated name,”
Das said.

The finance minister said the RBI has recommended framing legislation on this sector and it is of the view that cryptocurrencies should be prohibited.

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“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,” she added while speaking at the Monsoon session of the Parliament.

Sitharaman said the RBI mentioned that cryptocurrencies are not a currency because every modern currency needs to be issued by the central bank/government.

“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,” she remarked.

Cryptocurrency exchanges and blockchain companies are trying to cobble together their own independent association after the Internet and Mobile Association of India (IAMAI) dismantled Blockchain and Crypto Assets Council (BACC) – a representative body – last week, ETtech
reported today.

Talks on shutting down BACC – created in 2017 –
had been brewing for some time amid a growing conflict between the Reserve Bank of India (RBI) and crypto exchanges over the virtual currency’s legal status in India.

Earlier this year, the Indian government announced the tax on gains arising from virtual assets at a flat rate of 30% without any exemptions or deductions in Union Budget. Further, any buyer of virtual digital assets will now have to pay 1% as TDS.

The tax is required to be deducted at the time of credit of the amount or at the time of payment to the resident individual, whichever is earlier. The tax will be deducted only if the amount paid exceeds the specified limit.