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RBI seeks ban on crytocurrency in India

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RBI seeks ban on crytocurrency in India

Recently the Reserve Bank of India (RBI) has recommended a ban on cryptocurrencies, citing the ‘volatile effects’ of the country’s monetary and fiscal position.

It should be noted that China has effectively outlawed all cryptocurrency transactions by banning them outright, while El Salvador allows Bitcoin as legal tender.

Current status of crypto:

  • It is to be noted that there is no central authority regulating cryptocurrencies in India. Holding cryptocurrencies in India is still not considered illegal.
  • In the year 2020, the Supreme Court gave a strict ban on trading of cryptocurrencies in India, which was imposed by the RBI.
  • The central bank has been warning people about the use of virtual currency since 2013.
  • In April 2018, RBI prohibited regulated entities from dealing in virtual currencies or providing services to facilitate any person or entity to deal with or settle them. The direction was quashed by the Supreme Court in March 2020.
  • Subsequently, in May 2021, the central bank advised its regulated entities to comply with the standard obligations under Know Your Customer (KYC), Anti-Money Laundering, Anti-Money Laundering Act, 2002 etc. to combat financing of terrorism and foreign remittances. Maintain such regulation procedures for clients, in line with the regulations governing the Foreign Exchange Management Act (FEMA) norms for regulation.
  • The Union Budget 2022-2023 also proposes to introduce a digital currency in the coming financial year.

RBI’s concerns:

  • Non-fiat currency: Cryptocurrency is not a currency, as every modern currency needs to be issued by a central bank or government.
  • Fictitious and volatile: The value of fiat currencies is related to monetary policy and their status as legal tender, although the value of cryptocurrencies depends entirely on projections and expectations of high returns, which are not stable, so a country This is expected to have an adverse impact on the stability of the economy, both monetary and fiscal.

Cryptocurrencies:

  • Cryptocurrency, sometimes called crypto-currency or crypto, is a form of currency that exists digitally or virtually and uses cryptography to secure transactions.
  • There is no central authority to issue or regulate currency in cryptocurrencies. It uses a decentralized system to record transactions and issue new units.
  • It is governed by a decentralized peer-to-peer network called a blockchain.

Source – The Hindu

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