Cryptocurrency will be discouraged via taxation and capital gains provisions. This was the message from the Finance Minister during the Budget discussion in Parliament. Will this slow the growing use of cryptos in India? Russian kleptocrats have been using cryptos to escape sanctions. Ukraine has been a centre for cryptos trading due to its lax rules and is using them to raise funds for its war with Russia.
The Governor of the Reserve Bank of India, in February, highlighted two things. First, “private cryptocurrencies are a big threat to our financial and macroeconomic stability”. Second, “these cryptocurrencies have no underlying (asset)... not even a tulip”. Soon thereafter, a Deputy Governor of the RBI called cryptos worse than a Ponzi scheme and argued against “legitimizing” them. Yet, the RBI announced that it will float a Central Bank Digital Currency (CBDC). How do we understand all this? The Supreme Court of India has also asked the Government whether or not cryptos are legal.
The Governor calling cryptos as cryptocurrency has unintentionally identified them as a currency. Clearly, statements from the RBI indicate a growing worry since the proliferation of cryptos threatens the RBI’s place in the economy’s financial system. This threat emerges from the decentralised character of cryptos based on blockchain technology which central banks cannot regulate and which enables enterprising private entities (such as Satoshi Nakamoto who initiated Bitcoins in 2009) to float cryptos which can function as assets and money.
