India’s Finance Minister questions Blockchain; CBDC plans move forward

India’s finance minister, Nirmala Sitharaman, is not convinced that blockchain technology will be used for tradable assets. In the meantime, the country pursues global cooperation on regulation and is making progress with its digital rupee CBDC.

India’s Finance Minister Nirmala Sitharaman has said that the government was uncomfortable using blockchain technology for tradable assets. Sitharaman made the remarks while in the US for a visit that will see her attend the annual meeting of the International Monetary Fund (IMF) and the World Bank, and the G20 meeting of finance ministers and central bank governors (FMCBG).

The finance minister is happy to allow the technology itself to be used for various purposes and wants the country’s fintech sector to thrive. However, she was clear that she believed that it would lead to misuse of the technology.

Sitharaman said,

“But if it is about platforms, i.e. trading of assets created, and for buying and selling, and profit, are we able to determine for what purpose it is used? Are all the countries able to understand the money trade?”

She also pointed out that there had to be international cooperation on regulation, which she believes is necessary. She clarified that India absolutely wanted crypto regulations and would work with the G20, the World Bank and others to discuss the matter.

Meanwhile, those in the industry have responded to the comments, saying that crypto regulation will help promote innovation. Others pointed out that the economy Sitharaman criticized was a fundamental part of the technology.

The regulations are already in place

India will discuss crypto regulations at an upcoming G20 meeting, but officials are already preparing for a potential upheaval of the rules. The country may introduce goods and services tax (GST) on the asset class, which could go on top of the already heavy tax regime for crypto in India. There is no confirmation of this, and the tax may be between 18 and 22%.

India has also said that it will complete the legalization of cryptocurrencies in the first quarter of 2023. It must respond to the Financial Action Task Force (FATF) by May, and in the meantime it is addressing some of the difficulties in scrutinizing the market.

Officials are also looking at residents transferring their money abroad to buy properties. Indians have used their crypto holdings to buy property in Dubai, where many units accept crypto. The government states that this is an offense and may have legal consequences.

Appreciate blockchain technology and CBDC potential

India has been very keen on blockchain technology itself. There have been several developments supporting its use, including the fact that Polygon ran the first police report on the blockchain, which allowed users to register complaints against the police without fear of dismissal or manipulation.

Sitharaman also believes in the potential of blockchain technology, saying at a conference that there would be a 46% increase in the next few years. She said that banks would become increasingly digitized. India plans to use the technology in several industries, including healthcare, finance and law enforcement.