RBI wants complete ban on crypto, legal experts say it’s too late

Mumbai: On Christmas Eve 2013, the Reserve Bank of India (RBI)RBI) Issued a note warning Indians about the financial, legal and security risks of cryptocurrency. It came after the first four years of the world Cryptocurrency, bitcoin, was launched.
Opposition to the central bank after eight years Crypto Just become stronger. Earlier this month, the RBI told its board that a “complete ban” on crypto was necessary because partial restrictions would not work. In 2018, the RBI effectively banned crypto trading in India because it ordered banks not to facilitate it. The Supreme Court ruling in 2020, however, set aside the central bank’s order.
The RBI has consistently resisted crypto because it has concerns about financial stability. The central bank’s monetary policy will be less effective if cryptocurrencies are allowed to move freely. Virtual currency will also weaken banks and other regulatory bodies. Other concerns about crypto include extreme price volatility and difficulty tracing transactions.
Also, in a country like India, managing foreign exchange risk will be a major challenge as the money will flow through the digital currency and not necessarily in the form of dollars, RBI sources have argued. Also the chief economist of the IMF Geeta Gopinath Highlighted this challenge by pointing out that emerging and developing countries face more risks.
Mumbai’s Mint Road is of the view that crypto should not be considered as a currency or as an asset, especially given the concern about the transfer of funds illegally.
Seeing that not all wings are in agreement on this issue, the government has yet to finalize its position – which led to the postponement of the proposed legislation, at least until the next parliamentary session.
According to Fintech Player, a department of the government, which banned cryptocurrencies earlier this year, could oppose a full ban for fear of being cut off globally and clubbing with China.
Legal experts say that while it is out of the question to recognize crypto as a legal tender, it is too late to ban crypto. According to him, the government’s approach should be balanced so as not to hurt investors but at the same time not allow it to grow uncontrollably as it could jeopardize the country’s foreign exchange reserves and lead to disruption in the economy.
“The government is looking at cryptocurrency as an investment tool and plans to regulate it. Under income tax rules, cryptocurrency is treated as an asset and capital gains are likely to be attracted. GST and TDS are other areas where the status quo is not clear, ”said L Badri Narayan, executive partner of Laxmikumaran and Sreedharan Attorney.
Legal experts say that the need for comprehensive regulation and the differences in foreign exchange, it is not fair to compare India’s policy on crypto with developed countries like the UK. Rules
“You cannot take money out of India without permission. We are a foreign exchange-controlled market and that means we cannot make certain decisions like developed countries with free markets, ”said Narayan. He added that it would be difficult for regulators to stop crypto payments by Indians abroad.
The crypto industry has also sought clarification on foreign exchange and tax laws. Under the FEMA (Foreign Exchange Management Act), cross-border movement of ‘goods’ and ‘services’ is classified as import / export. However, the rules do not specify whether crypto tokens are ‘goods’. Sumit Gupta, CEO and co-founder CoinDCX, Co-chair of a crypto exchange and industry body BACC.
A government department has suggested that cryptocurrencies could be regulated by the market watchdog SEBI as an asset class. To this end, a bill on cryptocurrency with some amendments in RBI and SEBI laws was to be introduced in Parliament. However, the much-awaited crypto bill and other amendments were not introduced during the just-concluded winter session of Parliament.
Prime Minister Narendra Modi has said that emerging technologies like crypto should be used “to strengthen democracy, to weaken it”, while FM Nirmala Sitharaman said cryptocurrency would not be allowed for payments in India.


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