tue 30 August 2022 ▪ 17:00 ▪
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The massive adoption of cryptocurrencies continues to worry traditional financial institutions. Unlike its American counterpart, the FED, the Reserve Bank of India (RIB) is not taking off from the advance of cryptos. In July, she argued that cryptos were not a currency in their own right. She was making the argument that their value would be based solely on speculation and high expectations of returns. Therefore, they would have a negative impact on the currency and the flow of capital.
Reserve Bank of India is pushing to ban cryptocurrencies
The disenchantment of financial institutions 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. This is the complete opposite of the US Federal Reserve which continues to move closer to virtual currencies. It is Bitcoin Archives who, in a tweet, reaffirmed the firm 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 that approves Nirmala Sitharaman, Minister of Finance of the Union: “In in addition, the value of fiat currencies is anchored by monetary policy and their status as legal tender ». With this statement before the lower house, Sitharaman reframes the defenders of cryptos. It attracts the attention of users, specifying “ that the trade 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 only the RIB that is worried 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 the monetary and budgetary stability of a country”.
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 the regulations governing the know-your-customer standards (KYC), anti-money laundering (AML), anti-terrorist financing (CFT), obligations under the prevention of money laundering act (PMLA), 2002, etc., in addition to ensuring compliance with the relevant provisions under the foreign exchange management act (FEMA) for remittances abroad”, supported Nirmala Sitharaman.
Indeed, since the 1er july, the new laws impose a 30% tax on profits cryptocurrency shops and NFTs. Similarly, each cryptocurrency transaction will be taxable at 1% at source.
The RIB continues its standoff 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 with a whistleblowing campaign, with dissuasive laws at the key. However, for it to achieve a full-scale ban, international collaboration is needed.
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PhD student in financial law and experienced SEO web writer, Cedrick Aimé is passionate about cryptocurrencies, trading, etc. He naturally participates thanks to his articles in the blockchain revolution on a daily basis for a better democratization of DeFi.