The mass adoption of cryptocurrencies continues to worry mainstream financial institutions. Unlike its American counterpart, the FED, the Reserve Bank of India (RIB) does not take off from the advance of cryptos. In July, she argued that cryptos were not a currency in their own right. She brandished the argument that their value was based solely on speculation and expectations of high returns. Consequently, they would have a negative impact on the currency and the flow of capital.
The Reserve Bank of India is pushing to ban cryptocurrencies
Financial institutions’ lack of love for cryptocurrencies is anything but a surprise. The Reserve Bank of India (RIB) is part of this trend and refuses to recognize cryptocurrencies as a currency. It’s the complete opposite of the US Federal Reserve which continues to move closer to virtual currencies. This is Bitcoin Archives who, in a tweetreaffirmed the strong position of the RIB to advise against the adoption of cryptocurrencies. According to the RIB, the issuance of cryptos must be done by a Central Bank or a government institution for them to become a currency.
A position endorsed by Nirmala SitharamanUnion Finance Minister: “In Furthermore, the value of fiat currencies is anchored by monetary policy and their status as legal tender “. By this declaration before the lower house, Sitharaman reframes the defenders of cryptos. It draws the attention of users, stating ” that trading in virtual currencies is associated with potential economic, financial, operational, legal, customer protection and security risks“.
Rigid legislation to deter cryptocurrency users in India?
In India, it is not just the RIB that is concerned about the impact that the use of cryptocurrencies could have on the economy. The government, through the Minister of Finance, shares the doubts raised by the RIB and reaffirms that cryptocurrencies: “will have a destabilizing effect on a country’s monetary and fiscal stability”.
To prevent a mass adoption of virtual currencies in India, the RIB had instructed through a circular last year to its regulated entities:“to continue to carry out customer due diligence processes for transactions in virtual currencies, in accordance with regulations governing know-your-customer (KYC), anti-money laundering standards ( AML), Combating the Financing of Terrorism (CFT), obligations under the Prevention of Money Laundering Act (PMLA), 2002, etc., in addition to ensuring compliance with relevant provisions under the Foreign Exchange Management Act (FEMA) for overseas remittances,”supported Nirmala Sitharaman.
Indeed, since 1er July, the new laws impose a 30% tax on profits cryptocurrency trading and NFTs. Similarly, each cryptocurrency transaction will be taxable at source at 1%.
The RIB continues its showdown against the democratization of cryptocurrencies in India. She believes that without strong measures, the entire economy of the country could pay the heavy price. To avoid this, it proceeds by a campaign of denunciation, with the key to dissuasive laws. However, for it to achieve a large-scale ban, it requires international collaboration.
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