Considering the recent comments from the Reserve Bank of India, it doesn’t look like that the union government and the central bank were on the same page on cryptocurrencies—an industry that has been quietly flourishing in India over the past few months.
RBI governor Shaktikanta Das said on 16 November that India needs to have more in-depth discussions about cryptocurrencies as the government draughts legislation to regulate private virtual coinage.
He said at the State Bank of India’s Economics Conclave: “When the central bank says that we have serious concerns from the point of view of macroeconomic and financial stability, there are far deeper issues involved. I’m yet to see serious, well-informed discussions in the public space on these issues.”
The central government’s stance on cryptocurrencies has changed over time, moving from nearly outlawing them to having them reinstated by the courts. There have been proposals for tougher regulations on virtual coin transactions, arguing that an unregulated environment could drive more domestic savings into the asset class.
The Finance Ministry is drafting legislation to govern these assets. Officials said that the government was contemplating progressive actions on the issue following Prime Minister Narendra Modi’s recent review meeting, but unregulated crypto marketplaces cannot be allowed to become channels for money laundering and terror financing.
However, Das said: “Anecdotally, and even otherwise, we have lot of feedback that credit is being provided to open accounts, and various kinds of incentives are being provided.”
“The value of transactions and trading has gone up but the number of accounts is exaggerated,” he noted while adding that approximately 70 to 80 per cent of virtual currency accounts have a balance of less than 2,000 rupees.
According to reports, sources said that on 15 November industry leaders informed the Parliamentary Standing Committee on Finance that their exchanges in India had over 15 million active customers, with a total outstanding value of around $6 billion.
While according to an advertisement by the Internet and Mobile Association of India and crypto exchanges, “Crores of Indians have invested over Rs 600,000 crore in crypto assets.”
This isn’t the first time the RBI has issued a warning. At another event conducted by Business Standard last week, the RBI governor said: “Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint. The government is actively looking at the issue and will decide on it. But as the central banker, we have serious concerns about it, and we have flagged it many times.”
On the other hand, at a meeting chaired by PM Modi last week, it was acknowledged that this is an evolving technology and that the government would keep a close eye on it and take significant actions.
Furthermore, government sources claimed that because the concerns cut across national borders, it was thought that global alliances and collaborative measures would be required.
In terms of technology, Das stated that blockchain technology is 10 years old and can evolve independently of cryptocurrencies.
He said: “The discussions are that, you know, it’s a new technology we should capitalise on it, and I have said it earlier this technology is more than 10 years old, the blockchain technology is nothing new… The technology can grow and will grow without cryptocurrencies or whatever name you use to describe cryptocurrencies.”
However, a source said there were numerous difficulties raised in relation to cryptocurrency, and everyone from the industry expressed their opinions and “now we have to wait for the government”.
According to The Indian Express, the source said: “The government is going to bring a Bill to Parliament in this winter session. Once that Bill is referred to the Standing Committee, then we get an idea of what it states, and how the Bill will take care of it.”
Meanwhile, a Business Standard report claimed that the government is considering designating cryptocurrency exchanges as e-commerce platforms and levying a 1 per cent tax on them at the point of sale under the goods and services tax (GST) framework.
The report also noted that if the government agrees to control the sector, the new move will be used to monitor virtual currency transactions.
Additionally, the report claimed that it had been recommended that cryptocurrency exchanges be divided into three categories: facilitators, brokerages that allow buying and selling, and trading platforms that give a trading interface. The usage of blockchain technology might be classified as an export, allowing taxes to be gradually reduced.