Previously Finance Secretary TV Somanathan also stated that cryptocurrencies will never be legal tenders in India
Warming up to the crypto community, the government earlier proposed a 30% tax on income from digital assets including income from crypto and NFTs
There are 10.07 Cr crypto investors in India, and about 2 Cr joined the crypto bandwagon in 2021 alone
While the Budget announcements for cryptocurrencies have generally shown a positive reaction throughout the industry, RBI’s post monetary policy comment on crypto has been quite the knee-jerker.
The RBI governor has cautioned investors on the risks posed by private cryptocurrencies in India. He said, “Private cryptocurrencies are a threat to macroeconomic and financial stability and investors, who are investing at their own risk, should keep risks in mind.”
He added that crypto as assets have no underlying value whatsoever, “not even a tulip”.
For those wondering the ‘tulip’ metaphor meaning, Tulip mania was a period in the 17th century when tulips were JUST introduced. People bought them in large quantities causing their prices to shoot up.
The undermining of cryptocurrencies by the RBI governor is followed by Finance Secretary TV Somanathan’s comment that cryptocurrencies such as bitcoin and ethereum will never be legal tenders in India — i.e. a form of money that is legally accepted as a form of payment.
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He had stated, “Digital currency will be backed by RBI which will never be a default. Money will be from the RBI, but nature will be digital. Digital rupee issued by RBI will be a legal tender. Rest all (Bitcoin and the like) aren’t legal tender, and will never become legal tender.”
“People investing in private crypto should understand that it does not have the authorisation of the government. There is no guarantee whether your investment will be successful or not, one may suffer losses and govt is not responsible for this,” Somanathan added.
The comments from two high-profile government officials about crypto come within a fortnight of the Budget announcement. Finance Minister Nirmala Sitharaman had proposed a 30% tax on income from digital assets including income from crypto and NFTs.
According to many crypto experts and enthusiasts, 30% tax is levied on gambling, and the industry is not happy with comparing the likeness of crypto trading to gambling.
Despite the unhappiness, one thing among crypto investors, and other stakeholders was clear — India was warming up to the adoption of cryptocurrency. According to reports, there are 10.07 Cr crypto investors in India, and about 2 Cr joined the crypto bandwagon in 2021 alone.
The government had also proposed to launch its much anticipated sovereign-backed central bank digital currency (CBDC) or ‘digital rupee’ in 2022-2023.
But the comments from senior officials working with the government’s financial department showcase that while the country is keeping up with the trend, it has no intention of including the blockchain phenomenon in legal domains.