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Nirmala Sitharaman, finance minister, on Monday, reportedly, stated in the Parliament that any successful regulation or ban on crypto requires global collaboration. She said that cryptocurrencies could be banned or prohibited only after significant international collaboration on the risks, benefits, evolution of common taxonomy and standards. Sitharaman made this statement regarding cryptocurrencies or virtual currencies in Parliament, as a response to a query asked by Thirumavalavan, a member of Parliament.
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“Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards,” said finance minister.
Sitharaman also highlighted the fact that RBI has registered its concern over the adverse effect of cryptocurrency on the Indian economy. “RBI mentioned that cryptocurrencies are not a currency because every modern currency needs to be issued by the Central bank or government. Further, the value of fiat currencies is anchored by monetary policy and their status as legal tender, however the value of cryptocurrencies reset solely on the speculations and expectations of high returns that are not well anchored, so it will have a de-stabilizing effect on the monetary fiscal stability of a country.”
As per reports, a circular dated 31 May, 2021, RBI advised its regulated entities to carry out customer due diligence processes for transactions in virtual currencies, in line with regulations ruling standards for know your customer (KYC), anti-money laundering, combating of financing of terrorism, obligations under prevention of money laundering act, 2002 etc, in addition to ensure compliance with significant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
Commenting on the issue, Tarusha Mittal, COO and co-founder of UniFarm, a wealth creation platform, said in a news report quoted as saying, “Crypto or blockchain is a global phenomenon and it will be difficult to regulate the crypto industry based on isolated policies by various countries. There is an urgent need to create a homogenous global framework for crypto regulation. The international collaboration on the evaluation of risks and benefits is going to be hard because there are countries who already implemented policies to regulate cryptocurrencies and have a better understanding.”