Thol questioned the finance minister about any directives, circulars, cautions, or other communications the central bank has made regarding the issuance, purchase, sale, storage, and circulation of cryptocurrencies in India over the last ten years.
Government Needs Global Support, Says FM
According to Finance Minister Nirmala Sitharaman, cryptocurrencies are by definition transnational and demand global cooperation to prevent regulatory arbitrage.
On Monday, finance minister Nirmala Sitharaman answered a query of MP Thirumaa Valavan Thol (Member of Parliament from Chidambaram) regarding cryptocurrency, she stated that the Reserve Bank of India has made its position on digital assets, including cryptocurrencies, clear, but the Indian government is in favor of a global partnership if there is a need to ban or regulate cryptocurrencies.
Thol questioned the finance minister about any directives, circulars, cautions, or other communications the central bank has made regarding the issuance, purchase, sale, storage, and circulation of cryptocurrencies in India over the last ten years. “The RBI has been warning users, holders, and traders of Virtual Currencies via public notices on Dec. 24, 2013, Feb. 1, 2017, and Dec. 5, 2017, that dealing in VCs is associated with potential economic, financial, operational, legal, customer protection, and security-related risks.” According to Sitharaman, “the RBI also published a circular on April 6, 2018, forbidding its regulated firms from dealing in virtual currency (VCs) or offering services to assist anybody in transacting with or settling VCs.”
She added, “Since cryptocurrencies are by nature borderless, international cooperation is necessary to prevent regulatory arbitrage. Since the development of a uniform taxonomy and standards as well as major international collaboration on risk and benefit assessment is required for any law to be successful.”
The Reserve Bank has frequently raised concerns about the potential macroeconomic consequences of cryptocurrencies, highlighted their issues, and questioned their underlying foundations. In the RBI's annual report, the governor of the central bank even referred to cryptocurrencies as a "significant risk." Sitharaman briefed the Parliament's monsoon session that the RBI had proposed drafting cryptocurrency laws and that they should be outlawed.
She added that the RBI had requested that its regulated entities implement procedures related to cryptocurrencies, including Know Your Customer, Anti-Money Laundering, Combating of Financing of Terrorism, and obligations under the Prevention of Money Laundering Act (PMLA), 2002, in its May 31 circular. Additionally, it had requested that the applicable laws of the Foreign Exchange Management Act (FEMA) be followed with regard to remittances sent abroad.
According to experts' view, “the Indian government may prefer to frame laws around cryptocurrencies in tandem with other nations rather than making a jurisdiction-specific law, which may not be an effective solution. This is because the Finance Minister called for "worldwide collaboration" on regulating or banning cryptocurrencies.”
