The finance minister of the Reserve Bank of India has reportedly revealed in a recent report that the RBI plans to ban crypto in the country.
There have been several backlashes and criticisms directed at cryptocurrencies from various regulatory bodies around the world. This backlash has certainly not spared the Reserve Bank of India.
The RBI’s Finance Minister, Nirmala Sitharaman, explained in a parliament meeting held at the Lok Sabha, which is the lower house of India’s bicameral Parliament, on July 19th the potential dangers of unregulated use of cryptocurrencies in the country.
Sitharaman further stressed the need to regulate cryptocurrencies in India while speaking to the parliament on the subject.
This led to the proposition of the Reserve Bank of India to either block or completely ban the use of cryptocurrencies in the country.
This, however, is not the first instance of the government of India trying to prohibit the use of cryptocurrencies in the country. Earlier this year, in April, the Bank of India, in a bid to further prohibit the use of cryptocurrencies, passed a taxation law that included a crypto tax as high as 30% on every income made from trading or exchanging cryptocurrencies and a 1% tax deducted from the source (TDS), which is the crypto exchanges.
Due to this crypto tax law, the trading volume of cryptocurrencies in India experienced a drastic downturn that affected most of the cryptocurrency traders as well as the exchanges in the country.
Some of the exchanges affected include the Binance-backed exchange WazirX which experienced a whopping 63% decrease in trading volume a day before the implementation of the crypto tax law.
Even with these tax laws, the use and trading of cryptocurrencies in India still seem to be thriving, which is why the Reserve Bank of India wants to ban crypto in the country.
The Finance Minister acknowledged that since cryptocurrencies are borderless and decentralized, therefore the banning and regulation of cryptocurrencies have to be based on international contribution and consensus.
She further buttressed the point that any form of cryptocurrency regulation should be a matter of global consensus to properly assess the risks and benefits of cryptocurrencies to the global traditional financial systems before any regulatory laws are concluded.
According to the Finance Minister, the government of India does not recognize cryptocurrencies as currency since any form of modern currency has to be issued by the government to attain the status of legal tender in the country.
She also further concluded that cryptocurrencies are only speculative tools that traders invest in blindly in the hope of extravagant returns.
In her words,
“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 anchored, “
There have, however, been reports of the Bank of India’s plans to develop a central bank digital currency as a way to gradually transition into digital currencies. However, it isn’t clear yet if the RBI plans on using blockchain technology for the development of the CBDC since other nations have already started using blockchain technology for the development of their CBDC.