Governments must work together to regulate or ban crypto, Reserve Bank of India governor

On July 19, India’s Finance Minister Nirmala Sitharaman said in a speech in the Lok Sabha, the lower house of India’s bicameral parliament, that cryptos are a danger to international regulatory arbitrage and should be blocked or banned.

Sitharam explained that any attempt to regulate or ban crypto should be global because cryptocurrencies are borderless. But the decentralized nature of crypto transactions and the fact that they operate outside the traditional financial system have made the task extremely difficult for regulators.

According to Sitharaman, there should be international cooperation to assess the risks and benefits that cryptocurrencies pose to global monetary policy. She further stated that, unlike fiat money, cryptocurrencies have no value beyond being used for speculation.

“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 that are not well grounded.

A “clear danger” to the economy

Shaktikanta Das, governor of the Reserve Bank of India, said in the bank’s annual report that cryptocurrencies are a “real danger” and given their lack of any real value beyond mere belief, they can only be considered a speculative tool with “a sophisticated name.”

“We need to be aware of the new risks on the horizon. Cryptocurrencies are a clear danger. Anything that gains value based on belief, with no underlying basis, is just speculation under a sophisticated name.”

The RBI therefore recommends formulating a proper legislation to curb the cryptocurrency industry. Although the finance minister believes they should be banned.

India is using taxes to fight the crypto industry

The regulatory burdens imposed by the RBI seem to have hurt the local crypto industry enough to cause a similar effect to a regular ban. As CryptoPotato recently reported, the Reserve Bank of India imposed a tax on citizens’ crypto-earned income of up to 30%. This greatly affected the growth and stability of cryptocurrency exchanges operating in the country.

On July 1, the transaction volume of Binance in India fell by more than 63% from the $14.5 million it moved a day before the new cryptocurrency tax law took effect.

These measures have already led to other smaller exchanges, such as Vauld, being forced to suspend withdrawals, transactions and deposits on their platform due to “financial difficulties”.

Despite its anti-crypto policy, the Reserve Bank of India is actively working on the development of a digital central bank currency. The idea so far is to go for a gradual implementation that will not disrupt the traditional financial system.

The RBI has not revealed what technology it will use to develop a CBDC, but blockchain has played a leading role among other central banks, although the general consensus is to opt for a closed chain where all nodes are controlled by local governments.