RBI wants government to prohibit cryptocurrencies: Nirmala Sitharaman

moneycontrol.com:

Finance Minister Nirmala Sitharaman on July 18 said the RBI has expressed concerns over cryptocurrencies saying that they should be prohibited as they can have destabilising effect on the monetary and fiscal stability.

"In view of the concerns expressed by the RBI on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country, the RBI has recommended for framing of legislation on this sector. The RBI is of the view that cryptocurrencies should be prohibited," she said in a written reply to the Lok Sabha.

She said the RBI had registered its concern over the adverse effect of cryptocurrencies on the Indian economy. The RBI mentioned that cryptocurrencies are not a currency because every modern currency needs to be issued by the central bank or the government, she said.

Further, she said, the value of fiat currencies is anchored by monetary policy and their status as legal tender, however the value of cryptocurrencies rests solely on the speculations and expectations of high returns that are not well anchored, so it will have a destabilising effect on the monetary and fiscal stability of a country. Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage.

Therefore, she said, any legislation for regulation or for banning such currencies can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards. The Reserve Bank of India (RBI) has been cautioning users, holders and traders of Virtual Currencies (VCs) since 2013 at regular intervals that dealing in VCs is associated with potential economic, financial, operational, legal, customer protection