The Indian government supports global cooperation if it is necessary to ban or regulate digital assets, including cryptocurrencies, even though the Reserve Bank of India has made its position clear on these assets, Finance Minister Nirmala Sitharaman said on Monday July. 18. She answered a written question in parliament about cryptocurrency that day by MP Thirumaa Valavan Thol.
Thol asked the finance minister whether the central bank had issued any instructions, circulars, directions, warnings or anything else regarding the issuance, purchase, sale, possession and distribution of cryptocurrencies in India over the past 10 years. “RBI warned users, holders and traders of virtual currencies (VCs) on December 24, 2013, February 1, 2017 and December 5, 2017 that trading VCs is associated with potential economic, financial, operational, legal, customer protection and security-related risks. RBI had also issued a circular on April 6, 2018, prohibiting its regulated entities from dealing in virtual currencies (VCs) or providing services to facilitate any person or entity in dealing or settlement with VCs,” Sitharaman replied.
“Cryptocurrencies are by definition borderless and require international cooperation to avoid regulatory arbitrage. Therefore, any regulation or prohibition legislation can only be effective after significant international cooperation in evaluating the risks and benefits and the evolution of common taxonomy and standards,” she said.
The Reserve Bank has repeatedly warned about the macroeconomic effects of cryptocurrencies and pointed to their problems while questioning their underlying fundamentals. The central bank governor even called cryptocurrencies a “real danger” in the RBI’s annual report. Sitharaman informed the parliament monsoon session that the RBI has recommended legislation on cryptocurrencies and believed they should be banned.
“This is in light of RBI’s concerns about the destabilizing effect of cryptocurrencies on a country’s monetary and fiscal stability,” said Sitharaman.
She also said that in its May 31 circular, the RBI had asked its regulated entities to conduct processes related to cryptocurrencies, including Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT). ), obligations under the Money Laundering Prevention Act (PMLA), 2002. It had also requested compliance with the relevant provisions of the Foreign Currency Management Act (FEMA) for foreign transfers.
Commenting on Sitharaman’s comments, Mudrext CEO and co-founder Edul Patel said: “RBI’s stance on cryptos has always been rigid. But crypto space could give way to various innovations in the sector in the coming years. To grow such an industry and contribute to Digital India’s vision, the government should not ban it but instead create industry guidelines. If the government decides to refuse this, this will have consequences for a large part of the stakeholders. India is at the forefront of this growing ecosystem.”
The Finance Minister’s call for ‘global cooperation’ in regulating or banning cryptocurrency can be interpreted as an idea that the Indian government prefers to design laws around crypto together with other countries, rather than a jurisdiction-specific one. law that may not be an effective solution.” said Rishi Anand, partner at DSK Legal.
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