RBI urges the government to ban cryptocurrencies but Is An Indian Ban On Crypto Plausible?
RBI urges the government to ban cryptocurrencies but Is An Indian Ban On Crypto Plausible? Looking into the countries where cryptocurrency is prohibited or forbidden.
For Indian investors, the Reserve Bank of India’s stance on cryptocurrencies has been difficult. The central bank and regulatory authority have issued warnings to digital currency users. The Indian government wants a digital currency backed by the Reserve Bank of India and supports the notion of outlawing private digital currencies.
Since cryptocurrencies cannot be used as fiat currency, a currency issued by the government and backed by gold or another commodity, experts claim that estimating cryptocurrency pricing is risky.
However, the advocates of digital money claimed that the volatility would decrease over time as it gained more recognition.
Position of the RBI on cryptocurrencies
Shaktikanta Das, governor of the RBI, had referred to the digital currency system as an “obvious threat.” He also said that everything whose value is based on conjecture and has no foundation is just fancy-sounding speculation.
The risks that users and holders of the digital currency system will be exposed to are financial, operational, legal, customer protection, and security-related, as the RBI has repeatedly cautioned.
Further, The RBI has advised the Indian government to outlaw the digital currency on which TDS was implemented starting on July 1. According to Nirmala Sitharam, the finance minister, who made the statement in the Lok Sabha on Monday, the RBI believes that cryptocurrencies should be illegal.
“The Reserve Bank of India (RBI) has been warning users, holders, and traders of virtual currencies (VCs) via public notices on December 24, 2013, February 1, 2017, and December 5, 2017, that dealing in VCs is associated with potential economic, financial, operational, legal, customer protection, and security-related risks. Additionally, on April 6, 2018, the RBI issued a circular forbidding its regulated firms from dealing in virtual currency (VCs) or offering services to help anyone deal with or settle VCs. Added the.
She went on to say that the RBI had also advised its regulated entities in a circular dated May 31, 2021 to continue conducting customer due diligence procedures for venture capital transactions in accordance with laws governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), obligations under Prevention of Money Laundering Act (PMLA), 2002, etc. in addition to ensuring compliance with relevant provisions and regulations.
Position of the Indian government on cryptocurrency regulation
According to Finance Minister Nirmala Sitharaman, if a ban is necessary, India would like to work with other countries.
She asserted that because cryptocurrencies are international, international cooperation is necessary to prevent regulatory arbitrage. As a result, she explained, “any legislation for regulation or for banning may thus only be effective after extensive international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.”
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which “seeks to prohibit all private cryptocurrencies in India, but allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” was an attempt by the Indian government to be introduced last year.
The government has also announced a tax on gains from virtual assets. Since April 1, virtual currency holdings have had a 30% tax rate. The most recent addition was a 1% TDS beginning on July 1 of this year. This has affected the volume of trading on Indian cryptocurrency exchanges.
What is the regulation of cryptocurrency?
Governments worldwide disagree on whether to classify cryptocurrencies as assets or as a form of money. The governments have also been considering operational options for controlling it.
As a result, many types of cryptocurrency regulation worldwide, ranging from a total prohibition to operating under some restrictions to complete freedom of virtual currency trading without any rules.
The Central Bank Digital Currency (CBDC), a digital version of fiat money that can be transferred via wallets supported by blockchain and governed by the central bank, was announced as a plan by the RBI last year.
Despite being influenced by Bitcoin, this concept is distinct from decentralised virtual currencies and crypto assets, which are not issued by the government and do not have the status of “legal money” defined by the government.
The RBI and the Indian authorities are attempting to determine the delineation of digital money. Therefore the legal position of cryptocurrencies in India is still unclear. There is currently neither a regulation nor a ban on cryptocurrencies in India.
Is It Possible To Ban Crypto In India?
In recent years, the use of virtual currency has spread worldwide, including in India. A cryptocurrency is an essentially virtual or digital money that can be exchanged. Strong security is provided by cryptography, making it nearly hard to counterfeit or double-spend cryptocurrency.
In India, the history of cryptocurrency is thought to have begun in or around 2013. While the Reserve Bank of India (RBI), which had made it clear that virtual currencies were not legal cash in India, did not endorse it, the finance minister created a committee in April 2018 to prepare a Bill addressing cryptocurrencies. According to the government, it “was not in favour of a ban”
A draught bill was published in 2019 that declared owning, mining, selling, issuing, transferring, or using cryptocurrencies illegal and subject to a fine, up to 10 years in prison, or both. However, the Supreme Court lifted the ban on cryptocurrencies in March 2020. In the Rajya Sabha in 2021, Finance Minister Nirmala Sitharaman said that although the government has not taken any concrete steps to outlaw cryptocurrency advertisements in India, it will raise public awareness of cryptocurrencies through the Reserve Bank of India and the Securities and Exchange Board of India (Sebi). The government stated unequivocally in the Union Budget 2022–2023 that any transfer of virtual currency or cryptocurrency assets will be subject to a 30% tax.
Many investors applauded the move because, in their opinion, it marked the first step toward officially recognising cryptocurrencies as assets.
These are the nations where cryptocurrency is prohibited or forbidden.
These are the nations where cryptocurrency is prohibited or forbidden.
Since its launch in 2009, Bitcoin has generated controversy, as have the other cryptocurrencies that came after it.
Some view cryptocurrency as a safe harbour during economic storms, especially in the poor world. It is being heavily criticised for its volatility, usage in questionable transactions, and the extravagant use of electricity to mine it.
El Salvador was the first nation to adopt it as legal tender in September 2021, and the Central African Republic did the same in April of this year.
However, as more individuals use cryptocurrencies as an investment or a lifeline, criticisms have persisted and taken the form of various usage limitations.
From nation to nation, there are significant differences in the legal position of Bitcoin and other altcoins (alternative coins to Bitcoin). In some, the situation is still not clearly defined or is continually shifting.
Even if most nations do not forbid the use of Bitcoin, its position as a payment method or a commodity varies with various legislative repercussions.
There are restrictions on the usage of Bitcoin in several countries, and banks have stopped allowing their customers to conduct bitcoin transactions. Other nations impose outright bans on using Bitcoin and other cryptocurrencies, and anybody caught transacting in them faces severe penalties.
These nations have a complicated relationship with Bitcoin and other cryptocurrencies.
Algeria
Algeria Due to the passage of financial law in 2018 that made it unlawful to purchase, trade, use, or hold virtual currencies, Algeria now forbids using cryptocurrencies.
Bolivia
In Bolivia, using Bitcoin has been entirely prohibited since 2014. It and all other currencies that are not governed by a nation or an economic zone have been outlawed by the Bolivian Central Bank.
China
Throughout 2021, China has cracked down on cryptocurrencies with increasing vigour. Chinese authorities have frequently warned its citizens to stay away from the digital asset market and have cracked down hard on domestic mining and currency trades within China and abroad.
On August 27, Yin Youping, the deputy director of the People’s Bank of China’s (PBoC) Financial Consumer Rights Protection Bureau, cautioned people to “guard their purses” and referred to cryptocurrencies as speculative investments.
Most people believe that Chinese authorities are trying to launch their e-currency by making efforts to destroy Bitcoin. This decentralised currency is not under the jurisdiction of any government or institution.
To better track the transactions of its citizens, the PBoC plans to introduce its digital currency among the first major central banks in the world.
Colombia
Financial institutions are prohibited from facilitating Bitcoin transactions in Colombia. Financial institutions were cautioned by the Superintendencia Financiera in 2014 not to “protect, invest, broker, or manage virtual money operations”.
Egypt
In 2018, Egypt’s leading Islamic advisory body, Dar al-Ifta, published a religious ruling designating Bitcoin transactions as “haram,” forbidden by Islamic law. Egypt’s banking regulations were modified in September 2020, but they are not legally binding to prohibit trading or marketing cryptocurrencies without a Central Bank licence.
Indonesia
As of January 1, 2018, Bank Indonesia, the nation’s national bank, will no longer accept Bitcoin or other cryptocurrencies as payment.
Iran
Bitcoin and the Iranian government have a complicated relationship. Iran has resorted to the profitable activity of Bitcoin mining to finance imports to avoid the harshest effects of punishing economic sanctions.
While the Central Bank forbids trading cryptocurrencies discovered abroad, it has provided incentives to promote Bitcoin mining domestically.
According to blockchain analytics company Elliptic, Iran is home to 4.5% of the world’s Bitcoin miners, which could generate over $1 billion (€843 million) in annual revenue.
Iran has provided authorised miners with inexpensive energy in exchange for selling all of the cryptocurrency they have mined to the Central Bank, allowing the crypto industry to grow.
However, unauthorised mining consumes more than 2 GW of the national grid daily, contributing to a lack of power.
To do this, Iranian officials imposed a four-month mining embargo that would last until September 22.
Iraq
Despite persistent efforts by the authorities to prohibit their use, cryptocurrencies are gaining popularity in Iraq. Particularly antagonistic, the Iraqi Central Bank forbade their use in a statement released in 2017 that is still in effect today. Early in 2021, the Kurdistan regional government’s Ministry of Interior announced similar directives to halt money brokerages and exchanges processing cryptocurrencies.
Kosovo
Although Kosovo has not officially made it illegal to own or trade cryptocurrencies, its government announced a ban on the practice in early January, citing a worsening energy crisis as its justification. The nation, which unilaterally proclaimed its independence in 2008, is currently experiencing record power shortages, leading to the implementation of scheduled power cuts to preserve energy. Economy Minister Atrane Rizvanolli imposed a permanent ban on cryptocurrency mining in the nation to reduce energy waste. The duty of enforcing the ban and identifying mining sites around the country has been given to the police.
Nepal
As of August 2017, the Nepal Rastra Bank proclaimed Bitcoin to be forbidden.
Macedonia North
Only North Macedonia in Europe has enacted a formal ban on cryptocurrencies like Bitcoin, Ethereum, and others.
Russia
Due to its continuing invasion of Ukraine, Russia has a delicate relationship with cryptocurrencies.
Although cryptocurrency use is not prohibited in Russia, a war was fought until recently against it. Some now regard it as a saviour who can save the nation from the severe financial sanctions the West has put in place.
In July 2020, Russia established its first legislation governing cryptocurrencies, which recognised bitcoin as a kind of taxable property for the first time.
The regulation, which took effect in January of this year, also forbids Russian government employees from possessing any cryptocurrency.
Vladimir Putin, the president of Russia, has frequently associated cryptocurrencies with criminal activities and urged increased scrutiny of cross-border bitcoin transactions.
The prosecutor general unveiled new legislation in July permitting authorities to seize cryptocurrency believed to have been obtained unlawfully and used in bribes.
But it’s believed that Russia, the third-largest mining hub in the world, will now embrace cryptocurrency and use its natural resources to profit from Bitcoin mining rather than criticise it.
Turkey
In Turkey, many people started using cryptocurrencies as the value of the Turkish lira fell. This year, regulations came into effect quickly as inflation peaked in April despite having among the highest levels of use anywhere in the world.
The Republic of Turkey’s Central Bank published a regulation on April 16, 2021, prohibiting the direct or indirect usage of cryptocurrencies, such as Bitcoin, to pay for goods and services. The Turkish president Recep Tayyip Erdogan went further the next day and signed an order adding cryptocurrency exchanges to a list of businesses that must adhere to anti-money laundering and anti-terrorism financing regulations.
Vietnam
According to the State Bank of Vietnam, issuing, supplying, and using Bitcoin and other cryptocurrencies as payment is unlawful. Offenders risk fines ranging from 150 million VND (about €5,600) to 200 million VND (about €7,445).
The government does not, however, forbid the ownership or trading of Bitcoins.
edited and proofread by nikita sharma
