Finance minister Nirmala Sitharaman had stated during her February budget speech that the Reserve Bank of India tends to have an opinion about banning cryptocurrencies in India. Cryptocurrencies are currently unregulated in India.
Nirmala Sitharaman About RBI’s Opinion On Cryptocurrencies
The Union finance minister talked about the opinion of the Reserve Bank of India over cryptocurrencies. She said that RBI is in favor of banning cryptocurrency as they might have ill effects on fiscal and monetary stability.“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. RBI is of the view that cryptocurrencies should be prohibited,” the Union minister gave a written reply to the query in the Lok Sabha.
The Need For Legislation
Currently, there is no legislation in India regarding cryptocurrency and the government is likely to draft one in near future. The finance minister emphasized the need for international collaboration for effective legislation. “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,” she stated.
Cryptocurrencies Users In India
The situation of Crypto users and investors in India has not been very positive over the past few months. Many online platforms have come up with aggressive advertising regarding cryptos but the recent crash has revealed the ground reality to the masses. In 2021, The Reserve Bank of India also advised its regulated entities, such as banks to continue to carry 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. This was in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
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What’s Next?
“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, so it will have a de-stabilising effect on the monetary and fiscal stability of a country,” finance minister further added. The central bank is likely to come up with its own digital currency in upcoming years.
