RBI seeks a crypto ban but it needs global collaboration, says Nirmala Sitharaman

• The government of India believes that a “global collaboration” is needed for any effective regulation or ban on cryptocurrency.
• The Indian government has put cryptocurrency in the highest tax bracket of 30%, the same rate as lottery winning.
• The Indian finance minister, earlier this year, also specified that taxing cryptocurrency does not give it a legal status.

The Reserve Bank of India (RBI) has recommended the government to frame regulations for cryptocurrency, finance minister Nirmala Sitharaman said in the parliament on Monday (July 18).

"In view of the concerns expressed by the RBI on the destabilizing 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," the finance minister said in a written response to a question in the Lok Sabha.

She further added that the government believes that a “global collaboration” is needed for any effective regulation or ban on cryptocurrency as the digital currency is borderless in nature.

"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," she emphasized.

The government of India has not made its stance on cryptocurrency public, so far. However, it did introduce tax on all profits coming from crypto at a flat 30% rate, which is the highest tax bracket and the same rate as lottery winnings.

The government has also mandated a 1% tax deducted at source (TDS) on all crypto transactions redemptions, even the ones that make a loss.

Sitharaman, earlier this year, also specified that taxing cryptocurrency does not give it a legal status.

There has been speculation that the government could introduce legislation to regulate cryptocurrency and crypto sector in the monsoon session of parliament. However, no such bill has been listed for discussion as of now.

While speaking at India Global Forum earlier this year in February, Sitharaman had also taken a jibe on the crypto taxation. On being asked whether she sees the future of crypto in India, she said, “Many Indians have seen a lot of future in it and, therefore, I see a possibility of revenue in it.”

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