The Reserve Bank of India (RBI), according to Union Finance Minister Nirmala Sitharaman, is in favour of outlawing cryptocurrencies because it is worried about their destabilising impact on monetary and fiscal stability.
“In view of the concerns expressed by RBI on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country, RBI has recommended for framing of legislation on this sector. RBI is of the view that cryptocurrencies should be prohibited,” she told the Lok Sabha in a written reply to a query on this matter.
The finance minister added that effective legislation on this matter is possible only through international collaboration. “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,” she said.
In India, cryptocurrencies are currently unregulated, and the government is working to establish legislation to regulate them. Because of their lack of inherent value and mysterious character, cryptocurrencies have caused RBI to be uneasy. Numerous so-called crypto exchanges, many of which conduct their business online and solicit customers through media advertising by promising exceptional returns, haven’t helped the cause of cryptocurrencies in India. This is despite the fact that this approach allowed them to quickly expand their business, even across small towns.
Customers, at least some of whom do not fully comprehend crypto currencies and perceived them as instruments that could generate big returns, have received a dose of reality thanks to the recent crypto crash.