Government’s call for a crypto ban based on October’s Financial Stability Board report

Government’s call for a crypto ban based on October’s Financial Stability Board report

The report will outline how India’s cryptocurrency trade will be governed legally, said the official, who declined to be identified.

According to a senior government source, a Financial Stability Board (FSB) report that is anticipated in October would enable the government to decide whether to prohibit cryptocurrency transactions made through wallets and will offer a legal framework for handling crypto commerce in India.

According to the person, who spoke anonymously, the study would include guidance for how the legal framework for India’s bitcoin transaction will be developed. To address concerns about money laundering and terrorism funding that have lately arisen in India, the FSB is also researching foreign precedents on cryptocurrency laws. Its report is anticipated to inform India’s legal strategy.

“We’re looking forward to the (FSB) findings, which will have a big impact on cryptocurrency law. Furthermore, we think it addresses wallet transfers (of crypto).

Depending on what the investigation advises, we will decide whether or not to prohibit wallet transfers. Legislation is currently being developed. When we taxed it (in Budget 2022), we made it quite clear that the lawmaking process is still ongoing. The legislative problem would be greatly addressed with the help of this paper.

The FSB is drafting regulations to regulate cross-border cryptocurrency transactions. To address vulnerabilities and develop and implement strong regulatory, supervisory, and other policies in the interest of financial stability, it was established in 2009 under the auspices of the G20. It brought together national authorities, standard-setting bodies, and international financial institutions.

India is a participating member of the FSB, and three of its representatives—the deputy governor of the Reserve Bank of India and the chairman of the Securities and Exchange Board of India—occupy seats in the body’s Plenary. To represent India’s interests before the FSB, the FSDC Secretariat of the Department of Economic Affairs collaborates with several financial sector regulators and other pertinent organizations.

 

Status In India

Although there is no regulation of cryptocurrencies in India, the government in Budget 2022 promised a flat 30% tax on earnings from cryptocurrency transactions as well as a tax-deducted source (TDS) of 1%.

“RBI believes that it ought to be prohibited. Its position has been made known. According to the government, it should be taxed up until it is the subject of law.

The Budget stated the taxes because they should not be abandoned. Whether or not crypto should be outlawed will be helped by the FSB study. International laws are necessary for such. According to the source, if it were just illegal in India, “there would still be room for cross-border wallet transactions. What about the introduction of the GST, which has also been under discussion?

“Imposing GST would be the logical next step after a decision has been made on the legal element of cryptocurrency. To determine whether to impose GST, an asset must first be categorised as either a service or a commodity. We believe that this study will help to provide some answers to these questions. Those discussions rely on whether or not we want to legalize it and are essentially still in progress, the official added.

 

RBI’s Stance

Bitcoin has been fiercely opposed by RBI. Shaktikanta Das, the governor, has argued repeatedly that cryptocurrencies represent a threat to the nation and that anything whose value is based simply on speculation is speculative. In addition to ties between such markets and the regulated banking system, the central bank recognized several hazards associated with the cryptocurrency asset markets. The risks associated with crypto assets are difficult to identify and assess, according to the RBI.

According to the finance minister Nirmala Sitharaman in a written statement to the Lok Sabha, the RBI is in favour of prohibiting cryptocurrencies and has advised the ministry that they cannot be recognized as legal tender because they are not issued by the RBI. Due to its concerns over the potentially disruptive effects of cryptocurrencies on a country’s monetary and fiscal stability, the RBI has recommended that regulations be created for this market. According to Sitharaman’s response to the Lok Sabha, the RBI believes that cryptocurrencies should be banned. 

Depending on what the investigation advises, we will decide whether or not to prohibit wallet transfers. Legislation is currently being developed. When we taxed it (in Budget 2022), we made it quite clear that the lawmaking process is still ongoing. The legislative problem would be greatly addressed with the help of this paper. The FSB is drafting regulations to regulate cross-border cryptocurrency transactions.

To address vulnerabilities and develop and implement strong regulatory, supervisory, and other policies in the interest of financial stability, it was established in 2009 under the auspices of the G20. It brought together national authorities, standard-setting bodies, and international financial institutions.