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RBI Governor Sanjay Malhotra has once again voiced significant concerns regarding cryptocurrencies, emphasizing their potential to disrupt financial stability and monetary policy. His remarks follow recent observations by the Supreme Court, which has urged the government to establish a clear regulatory framework for digital assets in India.
RBI's Persistent Concerns
Governor Malhotra reiterated the central bank's long-standing apprehension about cryptocurrencies, highlighting their capacity to undermine the nation's financial stability and monetary policy. This stance remains consistent, with no new developments reported on the regulatory front.
Government Committee and Supreme Court's Stance
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A government committee is currently examining the issue of cryptocurrency regulation.
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The Supreme Court recently pressed the Centre to formulate a "clear cut" policy for cryptocurrencies, acknowledging their economic impact.
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A Supreme Court bench controversially likened Bitcoin trading to "hawala" transactions, labeling it an "illicit trade."
Regulatory Vacuum and Taxation
Despite the RBI's warnings and the Supreme Court's urging, cryptocurrencies in India remain largely unregulated, though not explicitly illegal. The government has been working on a discussion paper to gather stakeholder views before finalizing its policy.
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Taxation: The 2022 Union Budget introduced a flat 30% tax on profits from virtual digital assets. Additionally, income tax, TDS (Tax Deducted at Source), and GST (Goods and Services Tax) are levied on crypto exchanges and transactions.
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Legal Status: It is crucial to note that the imposition of taxes does not equate to legal recognition or approval of cryptocurrencies.
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Past Ruling: On March 4, 2021, the Supreme Court overturned an RBI circular from April 6, 2018, which had prohibited banks and regulated entities from providing services related to virtual currencies. This ruling reignited crypto activity but left a persistent regulatory void.
Path Forward
An inter-ministerial group (IMG), comprising officials from the RBI, SEBI, and the finance ministry, is actively reviewing global practices to inform India's policy approach. The ongoing regulatory uncertainty continues to impact both investors and exchanges within India's estimated ₹40,000 crore crypto ecosystem, underscoring the urgent need for policy clarity.
Sources
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Cryptos Likely To Hamper Financial Stability, Says RBI Governor, HT Syndication.
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RBI Guv flags crypto concerns, says it may hamper financial stability | Finance News, Business Standard.
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Crypto trading in India: Could hamper financial stability, says RBI gov; no new Bill yet, Times of India.
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RBI Flags Risks Of Crypto Trading Again as Legal Vacuum Persists; SC Urges Government Action, Times Now.
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Cryptocurrencies hamper financial stability: RBI Governor, YourStory.com.
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