RBI Pushes Crypto Ban, FM Seeks International Support
Addressing queries related to cryptocurrency in the Lok Sabha today, Finance Minister, Nirmala Sitharaman said that the Reserve Bank of India (RBI), has recommended the framing of legislation that would prohibit cryptocurrencies.
In her speech, she referred to cryptocurrencies as borderless and emphasised on international collaboration on the subject, to prevent regulatory arbitrage. “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," she said.
When asked whether RBI has issued directives regarding restricting the issuance, buying, selling, holding, and circulation of Cryptocurrency in India during the last ten years, the Finance Minister replied, “RBI has been cautioning users, holders and traders of Virtual Currencies (VCs) vide public notices on December 24, 2013, February 01, 2017 and December 05, 2017 that dealing in VCs is associated with potential economic, financial, operational, legal, customer protection and security related risks. RBI had also issued a circular in April 6, 2018 prohibiting its regulated entities to deal in virtual currencies (VCs) or provide services for facilitating any person or entity in dealing with or settling VCs."
She added that RBI, with its circular dated May 31, 2021 has also advised its regulated entities to continue to carrying out customer due diligence processes for transactions in VCs, in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), and obligations under Prevention of Money Laundering Act (PMLA), 2002, in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
“RBI mentioned that cryptocurrencies are not a currency because every modern currency needs to be issued by the Central Bank or 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 de-stabilising effect on the monetary and fiscal stability of a country," she added while addressing Parliament's Monsoon Session.
The central bank has flagged cryptocurrencies as a “clear danger". RBI governor Shaktikanta Das in RBI's annual report said that anything that derives value based on make-believe, “without any underlying", is just speculation under a sophisticated name.
Meanwhile, the government announced a tax on gains from virtual assets. The 30 percent tax rate on virtual currency assets has come into effect from April 1 and the latest addition was 1 percent Tax Deducted at Souce (TDS) from July 1 this year which has impacted trading volumes on cryptocurrency exchanges in India.
(Source : PTI)
