India's Finance Minister at IMF discussion: Crypto assets are not legitimate currency

By I-HODL | A Crypto Journey | 19 Apr 2022

Cryptocurrency trading and investing continues to look glum over in India, not only because of the bearish trends we're seeing in the markets, but also because exchanges and traders operating in the country are continuing to grapple with the country's recent introduction of a 30% crypto tax on digital assets.

Meanwhile, even as stakeholders continue to seek clarity, the government is digging its heels in and insisting that the decision to tax digital assets does not signal any recognition of cryptocurrency's legitimacy, but instead should be viewed as a measure to protect the country's financial stability. In fact, India's Finance Minister, Nirmala Sitharaman is going one giant step further and calling on the global community to follow suit in regulating cryptocurrencies and tackling the risks of money laundering and terror funding. Let's discuss.


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India's Finance Minister Calls for Global Cryptocurrency Regulation

According to Financial Express, India's Finance Minister Nirmala Sitharaman made the case today (April 19th, 2022) for global cryptocurrency regulation during a high level panel discussion, Money at a Crossroad: Public or Private Digital Money, organized by the International Monetary Fund, though she conceded that regulation could be very difficult to implement in many cases because of the inherent privacy of cold storage, self-custody wallets.

Sitharaman also explained to her peers that India's decision to impose a 30% tax on income from cryptocurrencies along with other digital assets should not be interpreted as an indication of the government's acquiescence or move to legitimize them. In fact, Sitharaman was quite clear that the government did not recognize cryptocurrencies as currency.

"Currency is that which is backed by a bank, the central bank of the country or the government of that country," she said. "So that is yet to happen in our country and it is going to happen sometime this year."


Sitharam explained that while the government's taxation measures did not indicate that it had legitimized cryptocurrency, it did mean that the government could keep an eye on who's buying and who's selling.

"Essentially, by taxing, we were trying to make sure that we are keeping a trail and also making sure these are eventually compliant with anti-money laundering rules, and making sure that these kind of operations don't end up inadvertently too funding any kind of terror activities," she said. 

Earlier this year, India's government proposed a 30% tax on income earned from crypto transactions and a 1% tax deducted at source on crypto transfers in asset classes above a certain threshold. 

Crypto Exchanges Deactivate Deposits

The Indian government's move to introduce regulation taxing cryptocurrencies were initially met with cautious optimism when first announced earlier this year, as some investors believed that the step signalled a move towards legitimization. This optimism has since soured for many, however, following the introduction of the hefty tax and as exchanges operating in the country disable rupee deposits using the state-backed United Payments Interface.

According to Analytics InsightCoinSwitch Kuber and WazirX have joined other exchanges disabling the UPI payments following a statement last week by the National Payments Corporation of India that it did not know of UPI's use by any cryptocurrency exchange.

For the moment at least though, there continues to be the P2P option. 

And so, my friends, here we are again. India's Finance Minister Sitharaman is standing up and once again championing a central bank digital currency while repeating the established narrative that a government supported or central bank backed currency can assure financial stability where a decentralized currency cannot. I have my reservations about that, but for now, I'll focus on the issue of the privacy and independence that one will have to sacrifice to use a central bank backed currency in the name of fighting money laundering and terrorism, etc. The thought of that gives me hives, guys, I'm sorry. And it's not because I am up to anything shady, I'd like to think that I'm not, but for some reason, my skin crawls whenever I feel like someone's looking over my shoulder.  And listen, I'm not going to parrot any conspiracy theory, at least I don't think I am. After all, I've been asking about ways one can look at genuinely protecting people in this space from bad actors. But to me, a government issued currency is not the answer.

But tell me, friends, what do you think of these developments in India? How do you think it will impact the cryptocurrency market in the country? And do you think that this approach to introduce stifling regulation will gain traction in other countries? Are you a fan of CBDCs? Do you see this form of currency replacing cryptocurrencies in the future or do you think they can exist side by side? As always, I'd love to hear your thoughts.

Well, I'm off in search of another story, my friends. Until we meet again, please remember to be safe. Arrivederci!

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