India’s Finance Minister, Nirmala Sitharaman has revealed that the Reserve Bank Of India is insisting on the cryptocurrency ban. Although its position on digital assets is clear, India continues to seek global collaboration to impose the ban.
The government is expected to come up with clear regulations, but the status of the ban remains unclear as international collaboration support has not yet been extended. Due to constant questions regarding the status of cryptocurrencies, Finance Minister Nirmala Sitharaman quoted,
RBI is of the opinion that cryptocurrencies should be banned. Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any regulatory or prohibition legislation can only be effective after significant international collaboration on the assessment of risks and benefits and the evolution of a common taxonomy and standards.
Earlier, Shaktikanta Das, the Governor of the RBI spoke about the issues that surround digital assets by raising questions about the fundamentals of the technology and the use cases.
RBI sees crypto as ‘real danger’
It was much earlier since 2008 that RBI was ever in favor of the adoption of virtual currency. The RBI Governor went so far as to explicitly label digital assets a “real danger” to the financial system.
The reason why crypto is called a “real danger” has to do with the digitization of the traditional financial system and the increase in cases of cyber risks.
This causes the government to pay particular attention to these growing concerns. This is the reason given in the foreword to the 25th issue of the Financial Stability Report which was published last month.
Earlier, the Minister of Finance mentioned that RBI was fine with regulating virtual currency and not banning it given the negative effect it could have had on monetary and fiscal policy.
However, RBI has always opposed the adoption of virtual currency as the country does not want to give digital assets a significant role in the economy.
Shaktikanta Das, mentioned,
We need to be aware of emerging risks looming on the horizon. Cryptocurrencies are an obvious danger. Anything that derives its value from pretense, without any underlying, is speculation under a fancy name.
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Cryptocurrency is not considered a currency
Nirmala Sitharaman said that RBI is of the view that virtual currency is not a currency as every currency has to be issued by the central bank/government. Moreover, commented Sitharaman,
Additionally, the value of fiat currencies is anchored by monetary policy and their status as legal tender. However, the value of cryptocurrencies is based solely on speculation and expectations of high returns that are not well anchored.
Crypto exchanges and blockchain companies had formed an independent association after the Internet and Mobile Association disbanded the representative body of the Blockchain And Crypto Assets Council (BACC) last week.
The Reserve Bank Of India in 2018 had prohibited regulated entities from dealing in digital assets or even providing services to any person or entity in dealing with virtual currencies. This ban was later lifted by the Supreme Court in 2020.
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