Finance Minister Nirmala Sitharaman has reiterated that the Centre would need international collaboration before implementing any legislation on cryptocurrencies.
Answering queries on the regulation of cryptocurrencies in the Lok Sabha today, Ms Sitharaman said that the Reserve Bank of India believes that cryptocurrencies should be completely banned.
"In view of the concerns expressed on the destabilising effect of cryptocurrencies on a country's monetary and fiscal stability, the RBI has recommended framing legislation on this sector. The RBI believes that cryptocurrencies should be prohibited," she said in her reply during the ongoing Monsoon Session.
"Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. 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 added.
The comments from the Finance Minister come less than six months after she revealed a strict tax regime that would see cryptocurrencies being included in the GST regime.
She announced one per cent TDS on all crypto transactions and a 30 per cent income tax on all income from digital currencies with no option of offsetting losses during the 2022 Budget speech.
"Many Indians have seen a future in crypto; therefore, I see a possibility of revenue in it," FM Sitharaman had said.
Despite the tax regime, the government still maintains that cryptocurrencies aren't 'legal'.
"We haven't said that this is currency. We haven't said that this has intrinsic value, but certain operations are taxable for the sovereign, which is why we have taxed," Ms Sitharaman had said in April.
However, the government has not made any move to bring in any legislation to make them illegal as neighbouring China had done last year.
The RBI has been highlighting the risks of cryptocurrency to investors as well as India's monetary system. Earlier, the central bank had imposed a ban on cryptocurrencies, but the Supreme Court lifted the ban in March 2020.