India’s finance minister has informed parliament that the central bank, the Reserve Bank of India (RBI), wants cryptocurrencies to be prohibited. However, she noted that “any legislation for regulation or for banning can be effective only after significant international collaboration.”
Indian Finance Minister discusses Crypto Ban and Regulation
Indian Finance Minister Nirmala Sitharaman answered some questions about cryptocurrency on Monday in Lok Sabha, the lower house of India’s parliament.
Parliament Member Thirumavalavan Thol asked the finance minister whether the Reserve Bank of India (RBI) “has recommended for framing suitable legislation to restrict the flow of cryptocurrency in India” and whether “the government has any plan to legislate any law restricting the use of cryptocurrency in India.”
The finance minister replied: “In view of the concerns expressed by RBI on the destabilizing effect of cryptocurrencies on the monetary and fiscal stability of a country, RBI has recommended for framing of legislation on this sector.” She elaborated:
RBI supports the prohibition of cryptocurrencies.
However, Sitharaman noted that “Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage,” adding:
Any legislation that is intended to regulate or ban can only be made effective after substantial international cooperation in evaluating the benefits and risks of any proposed regulation.
Consultation with the International Monetary Fund and the World Bank has taken place by the Indian government on crypto policy.
Last week, Sitharaman called on the G20 countries to bring crypto within the “Automatic Exchange of Information” framework, which over 100 countries are already using. The Financial Stability Board (FSB) also said it is working on a “robust” regulatory framework for crypto assets and will report its recommendations to the G20 finance ministers and central bank governors in October.
RBI Governor Shaktikanta Das recently said that “Cryptocurrencies are a clear danger,” emphasizing that “Anything that derives value based on make-believe, without any underlying, is just speculation under a sophisticated name.” In addition, the Indian government’s chief economic adviser, V. Anantha Nageswaran, warned in June about the danger of crypto and the risks posed by its lack of regulation.
In India, crypto income is subject to a 30% tax and earlier in the month, a 1% tax was deducted at source on cryptocurrency transactions.
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