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Are RBI & Finance Ministry on the Same Page With Crypto?

RBI and Finance Ministry do not have consistent positions on crypto.

Views of Nirmala Sitharaman and Shaktikanta Das on Crypto

On Monday, during a press conference, Finance Minister Nirmala Sitharaman and Reserve Bank of India (RBI) Governor, Shaktikanta Das gave their views on crypto tax and regulation.

She was asked that in the public sphere many people are interpreting the new crypto tax regime as a step towards regulation or that the government will not go for a blanket ban on crypto.

Ms. Sitharaman commented that “Discussions are going on and progressing. RBI is on board. The decisions of the Government and RBI are taken only after consultation with each other. We were all discussing prior to the budget. And we shall continue to have the discussions.”

They were also asked if the central bank is comfortable with the tax regime as the regime provides tacit recognition to crypto, given that Shaktikanta Das recently expressed his reservations about crypto.

The Finance Minister replied that all the decisions are taken only after careful discussions and consultations between the Ministry and RBI.

“I would be tying RBI’s hands if I hadn’t even talked with them. I think there’s complete harmony with which we’re working, respecting each other’s domain and also knowing what we’ve to do with each other’s priorities & in the interest of the nation. There’s no turfing here.”

Nirmala Sitharaman, Union Minister of Finance

Governor Shaktikanta Das was also of the same opinion.

“Like several other issues, this particular issue is internally under discussion between RBI and the Govt. Whatever points we have, we discussed with the Govt. Beyond that, I think I will not like to further elaborate,” he stated.

Deputy Governor’s Tirade

On the same day, in the evening, the Deputy Governor of RBI, T Rabi Sankar launched a scathing attack on crypto, in his speech at the Indian Banks Association 17th Annual Banking Technology Conference and Awards.

He called crypto a Ponzi scheme and likened it to the Tulip bubble. Again, the reservations about crypto undermining RBI’s role in controlling the economy and threatening the financial stability of the country were raised.

Moreover, he brought another concern to the forefront. He opined that stablecoins are a major threat to the Indian Rupee (INR) as they are more characteristic of a currency than other cryptocurrencies like Bitcoin, Ethereum, Cardano, etc. They can potentially replace the sovereign backed INR.

Ultimately, he called for an outright ban as he believes that crypto would benefit the Advanced Economies more than the Emerging Economies like India.

Government’s Stance is Not Clear

The Finance Minister refrains from clearly stating her stance and the RBI Governor straightforwardly denounced crypto.

This difference of opinion indicates that the RBI and the Ministry of Finance are not of the same view. The legislators have vacillated their stance.

During the Winter Session 2021, the crypto bill was supposed to be tabled according to the bulletin of bills. It did not happen.

Rather, in the subsequent Parliamentary session, the Government announced the imposition of taxes on crypto.

The crypto bill’s description read that it would ban private cryptocurrencies in India. But, the Government has opted for what is seen as a deterrent tax regime.

Last year, the Parliamentary Standing Committee on Finance had reportedly stated that “there was an understanding that cryptocurrency can’t be stopped but it must be regulated.”

Similar Issue Was Resolved in Russia

In the past month, Russian regulators were in news regarding their stance on crypto.

The Central Bank of the Russian Federation (CBF) had called for a complete ban on crypto and its mining because of its use for money laundering and terror financing, and its carbon footprint.

A few days later, Russian politicians took a stance opposite to that of CBF. Russia’s President, Vladimir Putin then urged both parties to build consensus.

Finally, it was announced that Russia is going to prepare a draft law by February 18 that will recognise crypto as an “analogue of currencies” rather than digital financial assets. 

In this case, Russian legislators clearly stated their stance. But in India, legislators are refraining from asserting their stance.

Whenever technology is created, lawmakers need to study its different facets. Laws always come after technology. For instance, globally there were no motor vehicle laws before the invention of the car or motorcycle. But laws are always evolving, so it should prudent to say that crypto regulations will come in evolutionary phases.

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