Reserve Bank of India-The Central Bank of India wants to ban cryptocurrencies said India’s Minister of finance Nirmala sitharaman. Sitharaman Respond to written questions from Members of Parliament Thirumaavalavan Thol that, Reserve Bank of India has expressed concerns about the “destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country” and has recommended “for framing of legislation on this sector”.
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“RBI is of the view that cryptocurrencies should be prohibited,” Finance Minister added. Response to the empty first question
(a) whether the Reserve Bank of India (RBI) has issued instructions, circulars,
directions, warnings etc. regarding restricting the issuance, buying, selling, holding and circulation of Cryptocurrency in India during the last ten years and if so, the
details thereof; sitaraman said 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. The said circular has been set aside by the Hon’ble
Supreme Court on March 04, 2020. Further RBI, vide its circular dated May 31, 2021
has also advised its regulated entities to continue to carry out customer due diligence
processes for transactions in VCs, in line with regulations governing standards for
Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of
Financing of Terrorism (CFT), obligations under Prevention of Money Laundering
Act (PMLA), 2002, etc. in addition to ensuring compliance with relevant provisions
under Foreign Exchange Management Act (FEMA) for overseas remittances.
b) whether RBI has registered its concern over the adverse effect of Cryptocurrency
on Indian Economy and if so, the details thereof;
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RBI has registered its concern over the adverse effect of Cryptocurrency
on Indian Economy. RBI mentioned that cryptocurrencies are not a currency because
every modern currency needs to be issued by the Central Bank / Government. Further,
the value of fiat currencies is anchored by monetary policy and their status as legal
tender, however 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 the monetary and fiscal stability of a country.
(c) whether RBI has recommended for framing suitable legislation to restrict the flow
of Cryptocurrency in India;
(d) if so, the details thereof;
(e) if not, whether the Government has any plan to legislate any law restricting the use
of Cryptocurrency in India and if so, the time frame fixed for the same?
(c) to (e): In view of the concerns expressed by RBI on the destabilising effect of
cryptocurrencies on the monetary and fiscal stability of a country, RBI has
recommended for framing of legislation on this sector. RBI is of the view that
cryptocurrencies should be prohibited.
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.
In the wake of the uncertainty, the local ecosystem has seen some talent move outside of the country and a growing number of local entrepreneurs build for the foreign markets and avoid serving customers in India.