India’s central bank is of the view that “cryptocurrencies should be prohibited,” the government told the parliament on Monday, raising more uncertainty about the future of the nascent virtual digital asset in the world’s second largest internet market.
Nirmala Sitharaman, the minister of finance in India, said Monday that the Reserve Bank of India has expressed concerns about the “destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country” and has recommended that “for framing of legislation on this sector. RBI is of the view that cryptocurrencies should be prohibited.”
But formulating any legislation for regulation or banning of crypto will require “significant international collaboration,” she added (PDF). The government stated its reasoning in response to a set of questions raised by Tholkappiyan Thirumavalavan, a member of parliament, in the House of People, locally known as the Lok Sabha.
“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 added.
Sitharaman’s response poses further challenge to the adoption of cryptocurrencies and platforms enabling innovation atop of it in the nation. India’s move to tax transactions and profits related to crypto trading earlier this year was seen as a move of Indian central bank beginning to embrace the fast-growing nascent technology.
But in recent months, Indian banks have sent different signals to the industry.
The Indian central bank continues to force the hand of banks from engaging with crypto platforms in India, a move that has made on-ramp a nightmare for the firms, people familiar with the matter said.
Coinbase halted trading service in India earlier this year because of “informal pressure” from the Reserve Bank of India, Brian Armstrong, crypto exchange’s chief executive said. Local exchanges and other crypto firms have additionally seen a sharp decline in trading volume in recent months, in part because of the local taxation law.
A leading influential technology lobby group in India turned its back on advocating for crypto in a major setback for the local ecosystem in the South Asian nation last week. Internet and Mobile Association of India, an 18-year-old lobby group, said it was dissolving the Blockchain and Crypto Assets Council, its four-year endeavor to support and lobby for the nascent technology category, because of regulatory uncertainty.
This is a developing story. More to follow…