PremiumThe govt, while declaring it would tax digital assets, is yet to make its stand clear on how it plans to regulate such assets. Crypto stakeholders met the tax proposal with euphoria, seeing it as a step toward legitimacy. However, the govt later clarified that taxation does not mean cryptos have become bonafide
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MUMBAI : Disclosing the inputs it sent to the government on cryptocurrencies at this juncture could affect India’s economic interests, the Reserve Bank of India (RBI) said, amid calls by its leadership to ban private digital assets.
Responding to Mint’s right to information (RTI) query, the central bank also cited a 2016 Supreme Court judgement to claim such information was exempt from being “prematurely" disclosed under the RTI Act.
RBI governor Shaktikanta Das has repeatedly warned the public about the pitfalls of cryptos, and deputy governor T. Rabi Sankar has even likened it to a Ponzi scheme.
Meanwhile, deputy governor Michael Patra said on 23 February that RBI’s views about cryptocurrencies might have delayed proposed legislation on the matter, PTI reported.
“Keeping in view the fact that the matter is now pending before the central government and considering the subject matter of the information sought, parting with the recommendations/inputs/opinion/suggestion sent to the central government at this stage may have an adverse effect in the economic interest of the state," RBI said in its response on 3 March.
The government, while declaring it would tax digital assets, is yet to make its stand clear on how it plans to regulate such assets. Crypto stakeholders met the tax proposal with euphoria, seeing it as a step toward legitimacy. However, the government later clarified that taxation does not mean cryptos have become bonafide.
Central banks worldwide have warned against privately issued cryptocurrencies for reasons ranging from volatility in value to risks to financial stability, even as they work on plans to launch their digital currencies.
While RBI is unlikely to deviate from its public stance, made through statements and speeches by its top executives, it is interesting that it does not want its official position known.
Experts said RBI has been concerned about the financial stability issue stemming from volatile assets like cryptos that are masquerading as currencies. “RBI has been vocal about its stance on cryptos multiple times in the past. While RBI has been bullish on central bank digital currencies (CBDCs), they have been cautious in the case of cryptos. RBI has also been wary of the negative impact that an over-exposure to unregulated crypto influx may have on the economy of the country," said Anupam Shukla, a partner at law firm Pioneer Legal.
Like many countries, India has also positioned its CBDC—the digital rupee—as a means to wean consumers off the crypto craze. So far, the plan is to launch it in FY23.
Shukla said that with legislation to regulate cryptocurrencies being actively contemplated, RBI would likely want to align its messaging with the central government’s agenda.
“Being one of the key stakeholders, RBI’s input will be critical in this area," Shukla said.
Although governor Shaktikanta Das raised the issue at multiple forums, the strongest criticism of cryptocurrencies so far has come from deputy governor Sankar. In a speech last month, Sankar advocated a ban, saying cryptocurrencies have no intrinsic value and could even be worse than Ponzi schemes.
Others believe that the government is treading the matter of regulation with utmost caution. Business Standard reported on Monday that the finance ministry is working on a consultation paper on a regulatory framework.
“Given the RBI’s antagonistic attitude towards cryptocurrency, the government is trying to follow the dual path of looking to strictly control or even ban cryptocurrencies," said Sonam Chandwani, managing partner at KS Legal and Associates. On the other hand, it is also trying to encourage the use of blockchain technologies which have immense potential for the economy, Chandwani added.
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