Finance Minister Nirmala Sitharaman on Monday said that cryptocurrencies are by definition "borderless," and that they require collaboration on a global scale in order to avoid any "regulatory arbitrage." The minister was addressing queries on crypto in the Lok Sabha when she said that any legislation for the regulation of banning can only be effective "after significant international collaboration on evaluation of the risks and benefits." Sitharaman also added that the Reserve Bank of India (RBI) "is of the view that cryptocurrencies should be prohibited." The RBI has recommended the framing of legislation on the crypto sector, Sitharaman said. The finance minister's latest statement reflects the strong stance that the banking regulatory body has maintained against cryptocurrency services prevalent in the country but also suggests that the government isn't ready to take a stern step yet against crypto.
Sitharaman noted that the RBI has "registered its concerns over the adverse effect" of crypto on the country's economy. She said that the RBI doesn't consider cryptocurrencies as regular currency, as "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."
"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," Sitharaman said. "RBI is of the view that cryptocurrencies should be prohibited."
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Having said that, Sitharaman also hinted that the government is currently awaiting a proper evaluation of the risks and benefits of crypto before deciding to ban them outright in the country.
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"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 and standards," Sitharaman noted.
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