Union Finance Minister Nirmala Sitharaman on Monday said that the Reserve Bank of India wants to ban cryptocurrencies, PTI reported.
“In view of the concerns expressed by the RBI on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country, the RBI has recommended for framing of legislation on this sector,” Sitharaman wrote in a reply to the Lok Sabha. “The RBI is of the view that cryptocurrencies should be prohibited.”
The RBI mentioned to the government that cryptocurrencies cannot be considered a legal tender as they are not issued by the central bank or the Centre, the minister added.
“The value of fiat currencies [government-issued currency] is anchored by monetary policy and their status as legal tender,” she added. “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 destabilising effect on the monetary and fiscal stability of a country.”
Cryptocurrencies do not rely on any central bank or government for transactions through a computer network. Cryptocurrencies are borderless and rely on international collaboration to prevent regulatory arbitrage.
“Therefore, any legislation for regulation or for banning such currencies can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards,” she added.
This is not the first time that the central bank has warned against cryptocurrencies.
In February, the Reserve Bank of India Deputy Governor T Rabi Sankar said that cryptocurrencies are similar to or worse than ponzi schemes and should be banned.
“Cryptocurrencies are not currencies, or financial assets or real assets or even digital assets,” Sankar said. “Therefore, it cannot be regulated by any financial sector regulator.”
The deputy governor said that it is not possible to regulate something that cannot be defined.
“All these factors lead to the conclusion that banning cryptocurrency is perhaps the most advisable choice open to India,” the official said. He noted that cryptocurrencies are anonymous, decentralised systems and said that this makes them attractive for illegal transactions.
Sankar’s statement came just four days after Reserve Bank of India Governor Shaktikanta Das said that private cryptocurrencies are a threat to macroeconomic and financial stability.