“The RBI is of the view that cryptocurrencies should be prohibited,” the Finance Minister said
India has already adopted a strict taxation regime for all cryptocurrencies, with a 30% crypto tax, 1% TDS and possible inclusion in the GST ambit
India has more than 100 Mn crypto investors in India, according to an Inc42 report
The Union Finance Minister Nirmala Sitharaman has dropped a bombshell on India’s crypto industry, stating that RBI is of the opinion that crypto should be banned.
“In view of the concerns expressed by the RBI on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country, the RBI has recommended framing of legislation on this sector. The RBI is of the view that cryptocurrencies should be prohibited,” the FM said.
Sitharaman’s comments come as India has already adopted a strict taxation regime for all cryptocurrencies, with a 30% crypto tax, 1% TDS and possible inclusion in the GST ambit.
The move will impact an already spiralling crypto economy in India and across the world, with major cryptocurrencies such as Bitcoin and Ethereum losing a significant chunk of their value.
Crypto In Regulatory Grey Area
The government has been unclear on its stance on cryptocurrencies for a long time, with the consistently vague remarks from the FM and the Reserve Bank of India constantly playing the role of antagonist.
Back in March, Sitharaman had said that the finance ministry sees a future in crypto and a possibility of revenue in the form of taxes. “Many Indians have seen a future in crypto, therefore, I see a possibility of revenue in it,” she then said.
In April, the FM, while addressing the International Monetary Forum (IMF) in Washington DC, said that while India recognises crypto’s usability, there is a need for global crypto regulations.
To be sure, India has expressed its concerns regarding the illegal use of cryptos, such as for terror financing and money laundering at multiple international forums.
However, even as the government has started taxing the gains made on cryptocurrencies, it still insists that it has not legitimised the same. “We haven’t said that this is currency. We haven’t said that this has intrinsic value, but certain operations are taxable for the sovereign and that is why we have taxed,” Sitharaman said in April.
While the government seeks to regulate and control cryptocurrencies, the RBI has been trying to get the government to ban crypto outright. RBI officials have gone public in likening crypto to the Dutch Tulip Market Bubble of the 17th century and calling it a danger to a nation’s economic stability.
At the same time, both the Finance Minister and the RBI have been in support of the government’s own answer to cryptocurrency, a Central Bank Digital Currency (CBDC) called the Digital Rupee. RBI has gone so far as to say that CBDCs could ‘kill’ the rationale for the existence of private cryptocurrencies.
With already an ambiguous regulatory stance on cryptocurrencies, the Finance Minister’s most recent comments will come as another blow to India’s fast-growing crypto industry, with more than 100 Mn crypto investors in India, according to an Inc42 report.
