Cryptocurrencies vs Nirmala Sitharaman: The Banning Saga Continues

Nirmala Sitharaman went on to add that cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage

Finance Minister Nirmala Sitharaman said that cryptocurrencies could be banned or prohibited only after significant international collaboration on the risks, benefits, and evolution of common taxonomy and standards. The Reserve Bank of India supports banning cryptocurrencies in India but there should be an international collaboration to make the crypto prohibition law effective in the country, according to Finance Minister Nirmala Sitharaman.

Replying to a query in the Lok Sabha, the Finance Minister said in a written reply: "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 banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards."

The minister added that RBI has been cautioning users, holders, and traders of virtual currencies through various public notices about dealing with such assets as economic, financial, operational, legal, consumer safety, and security-related risks.

Suman Bannerjee, CIO, Hedonova, on the recent announcement by RBI's ban on crypto.

As per The Coinage Act, 2011, the RBI is right. Currency can be produced by RBI only. The Finance Ministry has clarified that cryptocurrencies are an asset and not a currency. The debate is beyond this. The actual reason why the RBI wants to clamp down on cryptos is because of its usage in money laundering. India is a non-capital convertible country. This means that there are a lot of regulations on Indian people or companies on their ability to convert the rupee for another currency. When Indians start doing this, ie, selling rupees and buying another currency, the rupee will weaken. Cryptocurrencies are US dollar-denominated. Bitcoin is $20,000. You will never get to hear of Bitcoin's value pegged at 15 lakh rupees. The RBI is right, in the Indian context, the usage of cryptos as a legal tender needs to be controlled.