Lok Sabha Question No. 10 (STARRED), answered on 2022-07-18
Subject: Cryptocurrency
Ministry: FINANCE
Asked by: Thirumaa Valavan Thol

## FINANCE MINISTER

## (SMT. NIRMALA SITHARAMAN)

(a) to (e): A Statement is laid on the table of the House.

## Cryptocurrency

## 10: SHRI THIRUMAAVALAVAN THOL:

Will the Minister of FINANCE be pleased to state:

(a)  whether  the  Reserve  Bank  of  India  (RBI)  has  issued  instructions,  circulars, directions,  warnings  etc.  regarding  restricting  the  issuance,  buying,  selling,  holding and  circulation  of  Cryptocurrency  in  India  during  the  last  ten  years  and  if  so,  the details thereof;

(b) whether RBI has registered its concern over the adverse effect of Cryptocurrency on Indian Economy and if so, the details thereof;

(c) whether RBI has recommended for framing suitable legislation to restrict the flow of Cryptocurrency in India;

(d) if so, the details thereof; and

(e) if not, whether the Government has any plan to legislate any law restricting the use of Cryptocurrency in India and if so, the time frame fixed for the same?

## ANSWER

STATEMENT  REFFERED TO IN REPLY TO LOK SABHA STARRED QUESTION NO. 10 RAISED BY SHRI THIRUMAAVALAVAN THOL, HON'BLE MEMBER OF PARLIAMENT TO BE ANSWERED ON 18.07.2022 REGARDING CRYPTOCURRENCY

(a) Yes,  Sir.  RBI  has  been  cautioning  users,  holders  and  traders  of  Virtual Currencies (VCs) vide public notices on December 24, 2013, February 01, 2017 and December  05,  2017  that  dealing  in  VCs  is  associated  with  potential  economic, financial, operational,  legal, customer protection and security related risks. RBI had also  issued  a  circular  in  April  6,  2018  prohibiting  its  regulated  entities  to  deal  in virtual  currencies  (VCs)  or  provide  services  for  facilitating  any  person  or  entity  in dealing  with  or  settling  VCs.  The  said  circular  has  been  set  aside  by  the  Hon'ble Supreme Court on March 04, 2020. Further RBI, vide its circular dated May 31, 2021 has also advised its regulated entities to continue to carry out customer due diligence processes  for  transactions  in  VCs,  in  line  with  regulations  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 under Foreign Exchange Management Act (FEMA) for overseas remittances.

(b) Yes Sir. RBI has registered its concern over the adverse effect of Cryptocurrency on Indian Economy. RBI mentioned that cryptocurrencies are not a currency because every modern currency needs to be issued by the Central Bank / Government. Further, 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 de-stabilising effect on the monetary and fiscal stability of a country.

(c)  to  (e):  In  view  of  the  concerns  expressed  by  RBI  on  the  destabilising  effect  of cryptocurrencies on the monetary and fiscal stability of a country,  RBI  has recommended  for  framing  of  legislation  on  this  sector.  RBI  is  of  the  view  that cryptocurrencies should be prohibited.

Cryptocurrencies are by definition borderless and require  international collaboration to prevent regulatory arbitrage. Therefore any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.

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