Finance Minister Nirmala Sitharaman said in the parliament “RBI is of the view that crypto currencies should be prohibited. 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.”
The Finance Minister has also said that the RBI has registered its concern over the adverse effects of cryptocurrency on the Indian Economy. “RBI mentioned that cryptocurrencies are not a currency because every modern currency needs to be issued by the Central Bank/Government. 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,” FM said.
It is strange to note that the government is of the view that we can ban cryptocurrencies only after the “evolution of common taxonomy and standards” at the international level.
All along the RBI Governor was against permitting cryptocurrencies in the country. The earlier attempt to restrict crypto currencies was struck down by the Supreme Court as there was no clear policy on cryptocurrencies. The Supreme Court said, “When the consistent stand of the RBI is that they have not banned virtual currencies and when the Government of India is unable to take a call despite several panels coming with several proposals, including two draft Bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate.”
There is no need to wait for any collaboration with other countries to ban cryptocurrencies in our country. There are already restrictions and bans by different countries as per their individual requirement.
Algeria currently prohibits the use of cryptocurrency following the passing of financial law in 2018 that made it illegal to buy, sell, use or hold virtual currencies.
In Bolivia, there is a complete ban in place on the usage of Bitcoin since 2014. The Bolivian Central Bank issued a resolution banning it and any other currency not regulated by a country or economic zone.
China has cracked down on cryptocurrencies with increasing intensity throughout 2021. Chinese officials have repeatedly issued warnings to its people to stay clear of the digital asset market and have clamped down hard on mining in the country as well as currency exchanges in China and overseas. The People's Bank of China treats Cryptocurrencies as speculative assets and warns people to protect their pockets. On 24th September last year, China out rightly banned cryptocurrency transactions.
In Colombia, financial institutions are not allowed to facilitate Bitcoin transactions. Egypt has classified Bitcoin transactions as ‘haram’ which is prohibited under Islamic law. In Indonesia, Bitcoin cannot be used as a means of payment since January 1, 2018. In Nepal, Bitcoin has been declared illegal since August 2017. Russia has its own restrictions on cryptocurrencies. In Vietnam, using cryptocurrencies is a punishable offense.
Hence, waiting for some international collaboration to ban cryptocurrencies in our country does not seem to be logical. Over 115 million Indians have already invested in cryptocurrencies. By 2030, the total value of investments in cryptocurrencies from India will cross $241 million (about 1,900 crore). To save these common investors, the government must immediately ban cryptocurrencies.
(The author is a retired banker: Article courtesy THE PIONEER )