Cryptos; RBI wants Govt to prohibit cryptocurrencies, says Nirmala
New Delhi: Finance Minister Nirmala Sitharaman on Monday said the Reserve Bank of India (RBI) has complained about cryptocurrencies and wants them prohibited as they can destabilize monetary and fiscal stability.
“Because of the concerns expressed by the RBI on the destabilizing effect of cryptocurrencies on the monetary and fiscal stability of a country, the central bank has recommended framing of legislation on this sector. The RBI believes cryptocurrencies should be prohibited,” she said in a written reply to the Lok Sabha, whose monsoon session began on Monday.
Sitharaman said the RBI had registered concerns over the adverse effect of cryptocurrencies on the Indian economy. She said that a cryptocurrency is not a currency because the central bank or the government must issue every modern currency.
Also, she said, the value of fiat currencies is anchored by monetary policy and their status as legal tender. However, the value of cryptocurrencies rests solely on the speculations and expectations of high returns that are not well anchored. So, it will have a destabilizing effect on the monetary and fiscal stability of a country.
Cryptocurrencies are, by definition, borderless and require international collaboration to prevent regulatory arbitrage.
Therefore, the FM said any legislation for regulation or banning such currencies can be effective only after significant international collaboration on evaluating the risks and benefits and evolution of common taxonomy and standards.
The RBI has been cautioning users, holders, and traders of Virtual Currencies (VCs) since 2013 that dealing in VCs is associated with potential economic, financial, operational, legal, customer protection, and security-related issues risks.
It also issued a circular on April 6, 2018, prohibiting its regulated entities from dealing in VCs or providing services for facilitating any person or entity in dealing with or settling VCs. The Supreme Court set aside the circular on March 4, 2020.
On May 31, 2021, the central bank also advised its regulated entities to continue to carry out customer due diligence processes for transactions in VCs, in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), obligations under Prevention of Money Laundering Act, etc.
(VP)
