Cryptos Likely To Hamper Financial Stability, Says RBI Governor

Reserve Bank of India (RBI) Governor Sanjay Malhotra said on June 6 that cryptocurrencies may affect the country’s financial stability. 

Malhotra was replying to a question at a media interaction after his RBI Monetary Policy Committee review speech, news agency PTI reported.

“There is no new development as far as crypto is concerned. A committee of the government is looking into this. As you are aware, we are concerned about crypto because that can hamper the financial stability and the monetary policy,” he said.

Malhotra was speaking about the developments on the heels of the Supreme Court’s observation on cryptocurrency last month. The apex court questioned the government’s delay in formulating crypto regulations. 

The court said the current taxation of Bitcoin trading profits at 30% implies a form of legal recognition and if it’s acknowledged that it needs to be regulated, as per a Bar and Bench report. 

In May, a Bench comprising Justices Surya Kant and NK Singh, was hearing a plea related to cryptocurrency and said that the issues should be taken up in consultation with experts.

Justice Kant said that courts have been facing practical challenges while dealing with cryptocurrency cases. He was addressing Additional Solicitor General (ASG) Aishwarya Bhati who replied that she would seek instructions from the Centre on the matter. 

Prior to that, the court said trading in Bitcoin in India is like “dealing with a refined way of Hawala business”. Justices Kant and Singh made the remarks while dealing with a bail application of Shailesh Babulal Bhatt who was arrested for alleged illegal Bitcoin trade.

Crypto Regulation Is A Work In Progress

The Indian government is likely to release a detailed discussion paper on the policy framework options for crypto assets this month. “Discussion paper on crypto assets is being given finishing touches and will be posted for public comments next month,” said an ET report, citing sources last month.

The paper will likely draw from the synthesis paper jointly developed by the International Monetary Fund (IMF) and the Financial Stability Board (FSB), it said. 

Additionally, it will also seek opinions on practices adopted by various jurisdictions. 

India started levying a 1% tax deducted at source (TDS) on crypto transactions above INR 10K and a hefty 30% capital gains tax in 2022. 

In December 2023, nine cryptocurrency exchanges, including Binance, Kucoin and Bitfinex, were slapped with show-cause notices by India’s Financial Intelligence Unit (FIU) for allegedly “illegally” operating in the country through offshore entities.

India’s strict stance on the industry has forced several crypto firms to shut shop, including OKX, Pillow, Flint, and WeTrade.

Earlier this year, Dubai-based cryptocurrency exchange Bybit announced a temporary restriction on its services for Indian users. 

In a recent development, CoinDCX chief technology officer Vivek Gupta stepped down after a five-year stint at the crypto unicorn.