Eight years later, central bank protests crypto It just got stronger. Earlier this month, the RBI told its board that a ‘complete ban’ on crypto was needed as a partial ban would not work. In 2018, RBI effectively banned crypto trading in India as it ordered banks not to facilitate it. However, a Supreme Court ruling in 2020 overruled the central bank’s order.
RBI has consistently opposed crypto as it has concerns related to financial stability. Central bank monetary policy will be less effective if crypto is allowed to move freely. Virtual currencies would also undermine banks and other regulated entities. Other concerns about crypto include extreme price volatility and the difficulty of tracing transactions.
Moreover, in a country like India, managing foreign exchange risk will be a major challenge, as money will flow through digital currency and not necessarily in dollar form, RBI sources have argued. Chief Economist of the IMF Geeta Gopinath Highlighting this challenge while pointing out that emerging and developing countries are facing a major threat.
Mumbai’s Mint Road is of the view that crypto should be treated neither as a currency nor as an asset, especially given the concerns of illegally circulating funds.
The government has yet to firm up its view, noting that not all wings are co-ordinating on the issue – something that led to the postponement of the proposed law until at least the next Parliament session.
According to a fintech player, a section of the government may be against a complete ban for fear of being cut off globally and tying up with China, which banned crypto this year.
Legal experts say that recognizing crypto as legal tender is out of the question, but it is too late to ban crypto. According to him, the government’s approach has to be balanced so that investors are not hurt but at the same time do not allow it to grow uncontrollably as it may threaten the foreign exchange reserves of the country and cause disruption in the economy.
“The government is looking at cryptocurrencies as investment instruments and plans to regulate them. Under Income Tax rules, cryptocurrencies are treated as assets and attract capital gains. GST and TDS are other such areas. where the position of law is unclear,” said L Badri Narayanan, executive partner, Lakshmikumaran and Sreedharan Attorney.
Legal experts said there is a need for wider regulation and that it would not be fair to compare India’s policy stance on crypto with developed countries such as the UK, which is taking a ‘piecemeal regulation’ approach due to differences in foreign exchange. Regulations.
“You cannot take money from India without permission. We are a foreign exchange-regulated market and that means we cannot make certain decisions like developed countries which have a free market,” Narayan said. He said that it is important for regulators to stop crypto payments by Indians abroad. will be difficult.
The crypto industry has also sought clarity on foreign exchange and tax laws. “Under FEMA (Foreign Exchange Management Act), cross-border movement of ‘goods’ and ‘services’ are classified as import/export. However, the rules do not clarify whether crypto tokens amount to ‘goods’. is,” said Sumit Gupta, CEO and Co-Founder CoinDCX, a crypto exchange, and co-chair of the industry body bacc,
A section of the government has suggested that crypto may be regulated as an asset class by market regulator SEBI. For this, a bill on cryptocurrencies, with some amendments to the RBI and SEBI Acts, was to be introduced in the Parliament. However, the much-awaited crypto bill and other amendments were not introduced during the recently concluded winter session of Parliament.
Prime Minister Narendra Modi has said that emerging technology like crypto should be used to “empower democracy, not undermine”, while FM Nirmala Sitharaman said that India will not allow cryptocurrencies for payments Will go
,