Finance Minister Nirmala Sitharaman indicated that though the Reserve Bank of India (RBI) wants to ban cryptocurrency, not much can be done unless there is global collaboration.
“Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage," The finance minister reportedly said in a reply to queries in the Lok Sabha on 18 July.
"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 added.
Sitharaman said that this was in view of the concerns expressed by RBI on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country.
Crypto a Clear Danger: RBI
Last month, in the central bank’s Financial Stability Report, the RBI governor, Shaktikanta Das reiterated his apprehension regarding cryptocurrencies.
"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," Das said.
“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,” he added.
Das stressed that while technology has supported the reach of the financial sector and its benefits must be fully harnessed, its potential to disrupt financial stability has to be guarded against.
Clouds Over Crypto
Earlier this year, the government had first taxed, gains from virtual assets at 30 percent, and then levied 1 percent TDS on virtual digital assets a few months later which led to an abrupt fall in trading volumes.
Crypto exchanges were also abruptly robbed of Unified Payments Interface (UPI) support in April after National Payments Corporation of India (NPCI) issued the following statement:
"With reference to some recent media reports around the purchase of Cryptocurrencies using UPI, NPCI would like to clarify that we are not aware of any crypto exchange using UPI."
Currently exchanges in India and abroad have been forced to put their expansion plans on hold and implement measures to stay afloat and prepare for a prolonged crypto winter, as things take a downturn economically.
The Internet and Mobile Association of India (IAMAI) recently dismantled the Blockchain and Crypto Assets Council (BACC) last week, according to The Economic Times, and crypto companies are currently scrambling to form an independent association.
(With inputs from The Economic Times and Financial Express)
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