The Indian government has been hostile toward cryptos since the beginning. In 2018, the RBI announced that banks would not be able to make deals in cryptos. However, in early March 2020, the Supreme Court nullified the RBI circular banning cryptocurrencies.
Even so, the RBI has been cautioning users, HODLers, and traders of virtual currencies via notices about the inherent risk factors. It has also advised regulated entities to continue carrying out customer diligence processes for transactions.
Cryptos to be prohibited now?
In a recently issued statement, Nirmala Sitharaman, the Minister of Finance in India, revealed the central bank is concerned about the “destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country.” In retrospect, it has recommended the “framing of legislation on this sector.”
She further emphasized,
“RBI is of the view that cryptocurrencies should be prohibited.“
Per the RBI, cryptos are not currencies because every modern money “needs” to be issued either by the central bank or the government. Commenting on similar lines and elaborating on the de-stabilizing effect of cryptos, Sitharaman added,
“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.”
Despite RBI wanting to “prohibit” cryptos, the minister highlighted that they are “by definition borderless” and will require international collaboration to prevent regulatory arbitrage. So, for any ban to be effective, there has to be cooperation. She said,
“… 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.”
Earlier this year, India’s decision to tax crypto transactions and impose a 1% TDS was viewed as an unwelcoming sign by crypto users and most stalwarts. And now, the central bank’s “prohibition” assertion only indicates that the nation is far from changing its stance on cryptos.