Nirmala Sitharaman | Crypto Ban : Can’t ban crypto without international collaboration: Nirmala Sitharaman

Synopsis

The questions were about the Reserve Bank of India’s cautious stance on crypto assets, concerns over adverse effects of crypto on the Indian Economy and India’s progress in framework to legalize or restrict cryptocurrencies in the country.RBI’s view is to prohibit cryptocurrencies due to destabilising effects on the monetary and fiscal stability of a country.

Finance minister Nirmala Sitharaman (File photo)Finance Minister Nirmala Sitharaman said that cryptocurrencies could be banned or prohibited only after significant international collaboration on the risks, benefits, evolution of common taxonomy and standards.

Sitharaman’s statement on cryptocurrencies or Virtual Currencies (VCs) in Parliament was in response to a five-pointer question by Thirumavalavan, a member of Parliament from Tamil Nadu’s Chidambaram.

The questions were about the Reserve Bank of India’s cautious stance on crypto assets, concerns over adverse effects of crypto on the Indian Economy and India’s progress in framework to legalize or restrict cryptocurrencies in the country.
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RBI’s view is to prohibit cryptocurrencies due to destabilising effects on the monetary and fiscal stability of a country. The RBI has recommended framing of legislation on this sector, said Sitharaman’s reply.

The central bank has been quite vocal about this view on several occasions. Governor Shaktikanta Das had made it clear that crypto has no underlying fundamentals and can be a potential threat to economic and financial stability.

“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,” Sitharaman said.

The response reiterated that cryptos can’t be ‘treated’ as currencies because every modern currency needs to be issued by the central bank or federal government and the value of fiat currencies is anchored by monetary policy and their status as legal.

“The value of cryptocurrencies rests solely on the speculations and expectations of high returns that are not well anchored. So it will have a de-stabilising effect on monetary and fiscal stability of a country,” said Sitharaman, citing RBI.

The minister added that RBI has been cautioning users, holders and traders of virtual currencies through various public notices about dealing with such assets has economic, financial, operational, legal, consumer safety and security-related risks.

Earlier, the central bank, through its circular issued on April 6, 2018, had prohibited entities in its ambit to deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.

However, the circular Supreme Court of India lifted the ban and allowed RBI-regulated entities to carry out transaction processes in VCs after various checks and compliances.

The governing standards by Supreme Court included Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), and obligations under the Prevention of Money Laundering Act (PMLA), 2002 and more.

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    Updated: 07/18/2022 — 10:00