India’s finance minister Nirmala Sitharaman has said that the country’s central bank wants cryptocurrencies to be prohibited.
In a response to questions on crypto from the Indian parliament, Sitharaman cited the Reserve Bank of India’s (RBI) concerns regarding the “destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country” as a reason for holding this view.
Currently, cryptocurrencies are not regulated in India, and the government is holding consultations regarding the draft legislation to regulate them.
Earlier this year, it introduced new crypto taxation rules, including a 30% tax on any income from the transfer of digital assets and 1% tax deducted at source (TDS) for every crypto transaction.
“RBI is of the view that cryptocurrencies should be prohibited,” Sitharaman says.
“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 maintained a tentative stance over cryptocurrencies in the past. In her statement, Sitharaman says that the RBI “has been cautioning users, holders and traders of virtual currencies” about its potential risks via public notices issued in 2013 and 2017.
She adds that the RBI also 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, so it will have a destabilising effect on the monetary and fiscal stability of a country.”
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