The Centre and the Reserve Bank of India (RBI) did not quite agree with each other on various dimensions of cryptocurrencies such as Bitcoin and their trading platforms at a meeting chaired by Prime Minister Narendra Modi on digital currencies last week.
Several government departments at the meeting supported the idea of some form of control over the profusion of cryptocurrencies, but RBI is said to have reiterated its advocacy of a ban, highlighting macroeconomic and financial stability concerns, according to a report in ET.
Following the discussions, the Centre is expected to soon approach the Advertising Standards Council of India to issue guidelines for greater disclosures and sterner statutory warnings to accompany ads on cryptocurrencies or trading platforms, people with knowledge of the matter told the financial daily.
The meeting was called to discuss the future of cryptocurrencies that have been growing rapidly in India despite the pessimism of the apex bank.
Government departments favoured a middle path with some form of regulation of cryptocurrencies, arguing that the rapid pace of technological change and the advance digital transformation need to be taken into account, the daily cited a person familiar with the discussions as saying. Plus, it was discussed that some form of supervision was needed if the Centre wanted to bring them under the tax bracket.
The central bank’s primary concern was that these virtual currencies were intangible, making rules and taxation difficult, and the origin of this emerging asset class or exchanges being outside the country would also make regulation challenges, another person told the publication.
The RBI mentioned that the government and regulators would attract huge public criticism in the event of any turmoil in the cryptocurrency market resulting in small investors losing money.
Several policymakers had flagged concerns about the increasing popularity of virtual currencies and the lack of any rule or governing tool to take action in the event of any turmoil in the cryptocurrency market.
The apex bank has maintained that cryptocurrencies are a “serious concern” and it challenges India’s macroeconomic, financial and external sector stability.
Many Indians have now started to get remittances in virtual currency, which is a growing concern for security agencies as also the central bank. Further, security agencies apprehend its connection with money laundering and terror funding. The RBI fears it poses a challenge on account of capital flows.
The exchanges estimate that about 10.5 crore Indians hold crypto assets and that about 10 lakh trade in them. India is one of the countries yet to take a decision on whether to allow or ban virtual currencies. While Japan has permitted them, China has issued a blanket ban on all cryptocurrency transactions and mining, the publication mentioned.
