While some countries move forward to regulate cryptocurrencies, others backtrack. The Reserve Bank of India (RBI), the country’s central bank, is one of those tightening the siege against digital assets.
Central Bank of India recommended ban crypto
According to a report published by the Money Control portal, the RBI recommended the country’s government to ban cryptocurrencies. The RBI claimed that digital currencies pose a risk to India’s monetary stability.
However, the country’s government does not seem willing to do so, not before there is a “global collaboration”. As Finance Minister Nirmala Sitharaman highlighted, this action is necessary for any effective regulation or ban:
“In light of the concerns expressed by the RBI about the destabilizing effect of cryptocurrencies on a country’s monetary and fiscal stability, the RBI recommended the framing of legislation on this sector. The RBI is of the opinion that cryptocurrencies should be banned,” said the finance minister.
Global action to regulate cryptocurrencies
Sitharaman said that given the “borderless” nature of cryptocurrencies, global collaboration is necessary to avoid any sort of regulatory arbitrage.
“Therefore, any legislation for regulation or prohibition can only be effective after significant international collaboration in the assessment of risks and benefits and evolution of the taxonomy and common standards,” she said.
Sitharaman’s comments come amid rumors that the government could introduce a law to regulate the sector at the Monsoon Session of Parliament that began on Monday (18). However, no bill was listed for debate according to the Money Control portal.
The government of India has been debating the regulation of digital assets for years. But to date, it has not yet presented a document that brings clarity to the sector. But taxation has already started in the country.
In March of this year India passed a 30% tax on income from cryptocurrencies. In addition, Indians also have to pay a 1% withholding tax (TDS) and taxes on crypto gifts.
As a result, in April, trading on exchanges operating in India plummeted 55% in the first two days after the 30% tax took effect. Meanwhile, domain traffic dropped by 40%.
Then, when the 1% TDS tax came into effect, there was a further drop of up to 60% in the volume of transactions on local exchanges.
While cryptocurrency legislation is awaited, the RBI continues to work on its own central bank digital currency (CBDC).
The expectation is to launch the Indian CBDC later this year. According to RBI Deputy Governor T. Rabi Sankar, CBDCs could “kill” the reasons for the existence of private cryptocurrencies.