Why Does India Want To Ban Cryptocurrency

Union finance minister Nirmala Sitharaman on Monday said the Reserve Bank of Bharat (RBI) is in favour of banning cryptocurrencies because it is concerned near their destabilising consequence on monetary and fiscal stability.

“In view of the concerns expressed by RBI on the destabilising upshot of cryptocurrencies on the monetary and financial stability of a state, RBI has recommended for framing of legislation on this sector. RBI is of the view that cryptocurrencies should be prohibited,” she told the Lok Sabha in a written answer to a query on this matter.

The finance minister added that constructive legislation on this thing is possible only through international collaboration. “Cryptocurrencies are past definition borderless and crave international collaboration to prevent regulatory arbitrage. Therefore, whatever legislation for regulation or for banning tin be effective but after pregnant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards,” she said.

Currently, cryptocurrencies are unregulated in India and the government is in the midst of consultations to draft a legislation regulating hem. RBI has been apprehensive nigh cryptocurrencies considering of their cryptic nature and absence of any intrinsic value. The cause of cryptocurrencies hasn’t been helped in Republic of india by a slew of so-called crypto exchanges, many playing their business concern online, and soliciting customers through mass media advertising promising superlative returns — a strategy that helped them quickly abound their business concern, fifty-fifty across minor towns. The crypto crash of the past few months has served up a dose of reality to customers, at least some of whom practise not really empathize crypto currencies and saw them as instruments that could generate loftier returns.

“RBI has been cautioning users, holders and traders of Virtual Currencies (VCs) vide public notices on December 24, 2013, Feb 01, 2017 and December 05, 2017 that dealing in VCs is associated with potential economic, financial, operational, legal, customer protection and security related risks,” Sitharaman said.

RBI had also issued a circular in Apr 6, 2018 prohibiting its regulated entities from dealing in virtual currencies (VCs) or provide services for facilitating any person or entity in dealing with or settling VCs, she said. “The said circular has been set aside by the Hon’ble Supreme Court on March 04, 2020,” she added.

RBI on May 31, 2021 as well advised its regulated entities, such as banks to continue to bear out customer due diligence processes for transactions in VCs, in line with regulations governing standards for Know Your Client (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), and obligations under Prevention of Money Laundering Human activity (PMLA), 2002. This was in add-on to ensuring compliance with relevant provisions under Strange Substitution Management Act (FEMA) for overseas remittances.

The central banking company also registered its concerns over the agin effect of cryptocurrency on the economic system, she said. “RBI mentioned that cryptocurrencies are not a currency because every modern currency needs to be issued by the Primal Bank / Government. Farther, the value of fiat currencies is anchored past monetary policy and their status every bit legal tender, notwithstanding the value of cryptocurrencies rests solely on the speculations and expectations of loftier returns that are non well anchored, so information technology volition have a de-stabilising effect on the monetary and fiscal stability of a country,” she said.

The finance government minister said in her February upkeep speech that the central banking concern would soon issue its ain digital currency.