The Reserve Bank of India has been prominent with its views on digital assets like cryptocurrency. The RBI will need global support to regulate the cryptocurrency ban.
Today, Finance Minister Nirmala Sitharaman addressed the Lok Sabha on the queries related to cryptocurrency, and she said, “Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation for regulation or banning can be effective only after significant international collaboration evaluating the risks and benefits and evolution of common taxonomy and standards.”
The RBI was always hesitant to promote or consider digital assets by questioning their fundamentals and use cases. The RBI Governor Shaktikanta Das has mentioned digital assets as a “real danger” in the central bank’s annual report.
The RBI Governor also stated in the foreword to the 25th issue of the Financial Stability Report (FSR) that due to highly digitized financial systems, cyber risks are increasing, requiring special attention.
The Finance Minister said, “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.”
The RBI has also recommended framing legislation on this sector and believes cryptocurrencies should be prohibited.
The Finance Minister spoke in the Monsoon session of the Parliament, “This is given the concerns expressed by RBI on the destabilizing effect of cryptocurrencies on the monetary and fiscal stability of a country.”
The Finance minister added that RBI does not consider cryptocurrencies as a currency as, by the rule, every modern currency has to be issued by the central bank or government.
Sitharaman remarked, “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.”
Last week, the Internet and Mobile Association of India (IAMAI) dismantled the Blockchain and Crypto Assets Council (BAAC). Hence, the cryptocurrency exchanges and Blockchain companies are trying to make their independent association.
There are talks about shutting down BAAC, which was created in 2017. It is because of the growing conflict between the Reserve Bank of India (RBI) and Crypto exchanges over the virtual currency’s legal status in India.
At the beginning of the year, the Indian Government announced the tax on gains arising from virtual assets at a flat rate of 30% without any exemptions in the Union Budget. The buyer of Every virtual asset has to pay a TDS of 1%.
The tax will 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 when the paid amount is more than the specified limit.