RBI Wants Ban on Virtual Currencies, Govt Needs Global Support, Says FM

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The Indian government is in support of a global collaboration if there is a need to prohibit or regulate digital assets, including cryptocurrencies, even as the Reserve Bank of India has made its stance clear on these assets, finance minister Nirmala Sitharaman said on Monday, July 18. She was replying to a written question at the Parliament on cryptocurrency by MP Thirumaa Valavan Thol on the day.

Thol asked the finance minister whether the central bank had issued instructions, circulars, directions, warnings or anything else in relation with the issuance, buying, selling, holding and circulation of cryptocurrencies in the last 10 years in India. “RBI has been cautioning users, holders and traders of Virtual Currencies (VCs) vide public notices on December 24, 2013, February 01, 2017 and December 05, 2017 that dealing in VCs is associated with potential economic, financial, operational, legal, customer protection and security related risks. RBI had also issued a circular in April 6, 2018 prohibiting its regulated entities to deal in virtual currencies (VCs) or provide services for facilitating any person or entity in dealing with or settling VCs,” Sitharaman replied.

“Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards,” she said.

The Reserve Bank has repeatedly warned against the macroeconomic effects of cryptocurrencies, and pointed out their problems while questioning their underlying fundamentals. The central bank’s governor has even called cryptocurrencies a “real danger” in the RBI’s annual report. Sitharaman informed the monsoon session of the Parliament that the RBI has recommended framing legislation on cryptocurrencies and opined that they should be banned.

“This is in view of the concerns expressed by RBI on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country,” said Sitharaman.

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