INDIA: Addressing the concerns related to cryptocurrency in the Lok Sabha today, the Finance Minister, Nirmala Sitharaman said that RBI has recommended framing of legislation on this sector.
The central bank has time and again raised the issue of digital assets. Cryptocurrency stalling is a “clear danger”, RBI Governor Shaktikanta Das said in the RBI’s annual report that anything that derives value based on make-believe speculations “without any basis” is just speculation under a refined name.
Moreover, according to Finance Minister Nirmala Sitharaman, there should be international cooperation for the law to ban cryptocurrencies in the country. Earlier, RBI had raised concern over the “destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country.”
The Finance Minister said the RBI has registered its concern over the adverse effect of cryptocurrency on the Indian Economy. Replying to a query in the Lok Sabha, the Finance Minister made a written statement, “RBI is of the view that cryptocurrencies should be prohibited. Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory clashes. Therefore any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits.”
Commenting on the FM’s statement, Shivam Thakral, CEO of BuyUcoin, an Indian cryptocurrency exchange, said, “We have always reiterated the fact that we need a global framework for regulating the crypto and blockchain industry. We support our Finance Minister in her efforts to seek global coordination for regulating crypto as it is a positive step taken in the right direction.”
“Crypto assets are truly global and call for a dynamic global body to understand the nuances of Crypto/Blockchain and boost its implementation within the existing financial ecosystem,” he added.
“RBI has mentioned that cryptocurrencies are not currency as every modern currency has to be issued by a central bank / government. Furthermore, the value of fiat currencies is anchored by monetary policy and their status as legal tender, however, the value of cryptocurrencies rests solely on speculation and expectations of high returns, which are not well anchored, so it will have a destabilizing effect. about the monetary and fiscal stability of the country,” the FM also added.
In 2018, the RBI banned its regulated entities from dealing in virtual currencies or providing services that facilitate the handling or settlement of VCs by any person or entity. However, the RBI ban was lifted by the Supreme Court on 4 March 2020.
Through a circular dated 31 May 2021, the RBI has advised its regulated entities to continue to conduct customer due diligence processes for venture capital (VC) transactions in accordance with rules and regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), counter financing of terrorism (CFT), obligations under Prevention of Money Laundering Act (PMLA), 2002 etc. besides ensuring compliance with relevant provisions of Foreign Exchange Management Act (FEMA) for overseas remittances.
Throwing light on the current scenario, Sitharaman commented, “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.”
“Crypto/Blockchain is a global phenomenon and it will be difficult to regulate the crypto industry based on isolated policies of different countries. There is an urgent need to create a homogeneous global framework for the regulation of cryptocurrencies. International collaboration to assess risks and benefits will be difficult because there are countries that have already implemented policies to regulate cryptocurrencies and understand it better,” said Tarusha Mittal, COO and co-founder of wealth creation company UniFarm platform.