The Reserve Bank of India is in favour of outlawing cryptocurrencies in India, but Finance Minister Nirmala Sitharaman argues that for the law to be effective, there needs to be international cooperation.
The RBI believes that cryptocurrencies should be illegal, the Finance Minister wrote in response to a question in the Lok Sabha. Since cryptocurrencies are by nature borderless, international cooperation is necessary to prevent regulatory arbitrage. The development of a common taxonomy and standards, as well as significant international collaboration on risk and benefit assessment, are all necessary before any legislation for regulation or for banning can be effective.
Commenting on the FM’s statement, Shivam Thakral, CEO, BuyUcoin, a homegrown cryptocurrency exchange, said,
“We have consistently emphasised the need for a global regulatory framework to oversee the cryptocurrency and blockchain industries. We encourage our Finance Minister to pursue international cooperation for the regulation of cryptocurrencies because it is a step in the right direction.
He continued, “Crypto assets are truly global and demand a dynamic global body to comprehend the nuances of Crypto/Blockchain and promote its implementation within the current financial ecosystem.
The “destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country” had previously drawn the attention of the RBI.
The RBI has voiced its concern about the detrimental impact of cryptocurrencies on the Indian economy, according to the finance minister.
“RBI stated that cryptocurrencies are not a form of currency because a central bank or government must issue every form of money today. The value of fiat currencies is also anchored by monetary policy and their legal tender status, whereas the value of cryptocurrencies rests solely on speculation and unfounded expectations of high returns, which will destabilise the monetary and fiscal stability of a nation, according to FM.
The RBI forbade its regulated entities in 2018 from transacting in virtual currencies or offering services to assist any person or entity in transacting in or settling VCs. On March 4, 2020, the Supreme Court overturned the RBI’s ban.
The RBI instructed its regulated entities to continue conducting customer due diligence procedures for transactions in venture capital (VC) in accordance 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 pertinent provisions under Foreign Exchange Management Act.
“Crypto/Blockchain is a global phenomenon, making it challenging to regulate the crypto industry using disparate national policies. The development of a uniform global framework for cryptocurrency regulation is urgently required. Because some nations have already adopted regulations governing cryptocurrencies and have a better understanding of them, international cooperation on the assessment of risks and benefits will be challenging, according to Tarusha Mittal, COO and co-founder of UniFarm, a platform for cooperative wealth creation.