RBI is still aiming for a crypto ban, says the Minister of Finance
India’s Finance Minister Nirmala Sitharaman has revealed that the Reserve Bank of India insists on a ban on cryptocurrency. Despite clarifying its position on digital assets, India continues to seek global cooperation to impose the ban.
The government should come up with clear rules, but the status of the ban is still unclear given that support from international cooperation has not yet been expanded. Due to constant questions regarding the status of cryptocurrencies, Finance Minister Nirmala Sitharaman quoted,
The RBI is of the opinion that cryptocurrencies should be banned. Cryptocurrencies are by definition borderless and require international cooperation to prevent regulatory arbitrage. Therefore, any legislation for regulation or prohibition can be effective only after significant international cooperation on the evaluation of risks and benefits and the development of common taxonomy and standards.
Earlier, Shaktikanta Das, the RBI governor, talked about the problems surrounding digital assets by raising questions about the basics of technology and use cases.
RBI considers crypto to be “real danger”
It has been quite a while since 2008 that RBI has never been in favor of using the virtual currency. The RBI governor has gone so far as to explicitly call digital assets a “real danger” to the financial system.
The reason behind calling crypto “real danger” is related to the fact that the traditional financial system is being digitized with cases of cyber risk increasing.
This makes the government pay special attention to such growing concerns. This was the reason given in the preface to the 25th edition of the Financial Stability Report published last month.
Earlier, the Minister of Finance had mentioned that RBI is involved in regulating virtual currency and does not ban it in view of the negative effect it could have had on monetary and fiscal policy.
However, RBI has always maintained its disagreement with the use of virtual currency, as the country does not want to give digital assets an important role in the economy.
Shaktikanta Das, mentioned,
We must be aware of the new risks on the horizon. Cryptocurrencies are a clear danger. Anything that gains value based on make believe, without any underlying, is just speculation under a sophisticated name.
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Cryptocurrency is not considered a currency
Nirmala Sitharaman had said that the RBI is of the opinion that virtual currency is not a currency as every currency must be issued by the central bank / government. In addition, Sitharaman commented,
Furthermore, the value of fiat currencies is rooted in 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-established.
Crypto exchanges and blockchain companies had formed an independent association after the Internet and Mobile Association dismantled the representative body of the Blockchain And Crypto Assets Council (BACC) last week.
The Reserve Bank of India in 2018 had banned regulated entities from handling digital assets or even providing services to any person or entity in handling virtual currencies. This ban was later lifted by the Supreme Court in 2020.
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Featured image from UnSplash, chart from TradingView.com
