Shortly after finance minister Nirmala Sitharaman informed the Parliament that the Reserve Bank of India supports the ban on cryptocurrency but the Indian government will regulate the digital asset on the basis of global framework, the Indian crypto community said that the country must take steps to understand the best practices connected to the asset class and take benefits from them. Some experts even agreed on the RBI’s stance that cryptocurrencies cannot be regular currencies.
“What the finance minister stated in Parliament are two known positions, i.e., first, RBI does not favor Cryptos and second, that the government wants to be in sync with global regulation. What we are saying is that the governments across the world over is figuring out how to regulate Crypto,’ said Rajagopal Menon, vice president at leading crypto exchange firm WazirX.
“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,” finance minister Nirmala Sitharaman on Monday told the Parliament when she was asked about India’s stance on this digital asset class.
“Crypto is an asset class that is being regulated globally and India should not lose out on its benefits. We need to take an example of countries that have already regulated crypto and see how they have benefited in job creation, economic growth, empowering entrepreneurs, etc,” Menon told News18.com.
“Hence, India must take a step to collaborate and understand the best practices so that we do not lose out in the longer term. Developers are working towards a vision of creating the next Facebook and Google in Web3 from India and the government can benefit immensely by helping these entrepreneurs realize their goals,” he added.
Suman Banerjee, CIO at Hedenova however said that RBI’s stance is justified as cryptocurrencies in the Indian context can be used for money laundering.
“As per The Coinage Act, 2011, the RBI is right. Currency can be produced by RBI only. The Finance Ministry has clarified that cryptocurrencies are an asset and not a currency. The debate is beyond this. The actual reason why the RBI wants to clamp down on cryptos is because of it’s usage in money laundering,” he told News18.com.
Banerjee added that that usage of crypto as a legal tender needs to be controlled. “India is a non-capital convertible country. This means that there are a lot of regulations on Indian people or companies on their ability to convert the rupee for another currency. When a lot of Indians start doing this, ie, selling rupees and buying another currency, the rupee weakens. Cryptocurrencies are US dollar-denominated. Bitcoin in $20,000. You never hear of Bitcoin being 15 lakh rupees. The RBI is right, in the Indian context, the usage of cryptos as a legal tender needs to be controlled,” he noted.
The Reserve Bank of India has repeatedly warned against the macroeconomic effects of cryptocurrencies, and pointed out their problems while questioning their underlying fundamentals. The central bank’s governor has even called cryptocurrencies a “real danger” in the RBI’s annual report. However, India is unlikely to impose a ban on cryptocurrencies right away, and has instead started levying high amount of taxes on virtual digital assets.
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