More countries have continued to join in the aversion for cryptocurrencies which provides an independent channel for handling money, making transactions and making investments.
Deputy Governor of the Reserve Bank of India, T. Rabi Sankar, while speaking at a banking conference spoke about cryptocurrencies. He said that cryptocurrencies were “specifically developed to bypass the regulated financial system” and that they are not backed by any assets or underlying cash flow. He, therefore, joins a growing list of top officials that have spoken against cryptocurrencies.
The top official of India’s central bank also suggested an outright ban on cryptocurrencies in the country. His suggestion comes after the government proposed that virtual digital assets should be taxed; meaning that cryptocurrencies have been at least recognized by the government
Still speaking, the Deputy Governor said that “We have also seen that cryptocurrencies are not amenable to definition as a currency, asset or commodity; they have no underlying cash flows, they have no intrinsic value; that they are akin to Ponzi Schemes, and may even be worse”.
Two weeks ago, following an announcement that it plans to launch a central bank digital currency in the financial year of 2022-2033 starting April 1st, India’s finance minister announced plans to tax cryptocurrencies and NFTs. According to the country’s finance Minister Nirmala Sitharaman, income from the transfer of any virtual assets will be taxed at 30 percent. She also proposed a 1 percent tax deduction at source on payments made to purchase virtual assets, so as to capture details of all such crypto transactions. “No deduction in respect of any expenditure or allowance shall be allowed while computing such income except the cost of acquisition. Further, loss from the transfer of digital assets cannot be set off against any other income. Gift of a virtual digital asset is also proposed to be taxed at the hand of the recipient”, she said.
“The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” she added in her budget speech.
Compared to other countries, cryptocurrencies have really meandered their way into the country despite global scrutiny, aversion and uncertainty. India’s population as well its position as the world’s second-largest internet market has helped cryptocurrencies to find a place in the country. A report from Chainalysis says India has the second-highest adoption rate for cryptocurrency investments.
Back in 2018, India banned financial companies from dealing with cryptocurrency but this was overturned in 2020 by the country’s Supreme Court. Most banks have, however, continued with the apex bank’s stance.
The Deputy Governor also revealed that New Delhi and the Reserve Bank of India also subscribed to his stance on cryptocurrencies and that the two were holding discussions to formulate crypto-related rules. This means that the apex bank never changed its stance on cryptocurrencies.