Cryptocurrencies hamper financial stability: RBI Governor

RBI Governor Sanjay Malhotra said the central bank is concerned about cryptocurrencies as it can hamper financial stability

Mumbai: RBI Governor Sanjay Malhotra on Friday said the central bank is concerned about cryptocurrencies as it can hamper financial stability.

Malhotra was replying to a question during a media interaction post the RBI monetary policy about the developments in the backdrop of the Supreme Court’s observation on cryptocurrency last month.

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“There is no new development as far as crypto is concerned. A committee of the government is looking after this. Of course, as you are aware, we are concerned about crypto because that can hamper financial stability and monetary policy,” Malhotra said.

The Supreme Court last month asked the Centre to formulate a “clear cut” policy on regulating cryptocurrency, while underlining its impact on the economy.

A Supreme Court bench termed the Bitcoin trade as an illicit trade, more or less like “hawala” business. India is currently working on a discussion paper for cryptocurrencies and an inter-ministerial group (IMG), comprising officials from RBI, Sebi and Finance Ministry, is looking into global norms.

In absence of any regulation, cryptocurrency is not yet illegal in India. The discussion paper will give the stakeholders an opportunity to give their views before India decides on its policy stance on cryptocurrencies.

In 2022, the government announced a flat 30 per cent tax on gains arising from cryptocurrencies. Taxing income from cryptocurrencies does not necessarily and explicitly legalise cryptocurrencies.

Currently, crypto assets are unregulated in India. Here, cryptocurrencies are regulated from the perspective of anti-money laundering law. Besides that, income tax and TDS are levied on earnings from trading in such virtual digital assets. Also, GST is levied on cryptocurrency exchanges.

It may be noted that, on March 4, 2021, the Supreme Court had set aside an RBI circular of April 6, 2018, prohibiting banks and entities regulated by it from providing services in relation to virtual currencies.