'Taxation of cryptocurrency is a sovereign right': Finance Minister

‘Taxation of cryptocurrency is a sovereign right’: Union Finance Minister

This is what the Union Finance Minister Nirmala Sitharaman regarding cryptocurrencies in India during Union Budget 2022. However, she also clarified that a final decision on banning of cryptocurrencies will be taken after due consultation with all the stakeholders. Nothing has been done to legalise, ban cryptocurrency in India.

She also hit out at various members of the opposition, stating that taxing crypto currency is a "corrective action", lest it is said that nothing was done despite the presence of a large Cryptocurrency investors in the country.

Responding to questions posed around Union Budget 2022, particularly around cryptocurrency taxation and legalisation in the Rajya Sabha, FM Nirmala Sitharaman clearly noted that while the "profit emanating from transactions associated to cryptocurrency has been taxed, nothing has been done, at the moment, to legalise, ban or de-legalise it".

Union Finance Minister Nirmala Sitharaman while presenting the Budget, imposed a 30 percent tax on private digital assets. In doing so, the government ignored the repeated public warnings by the RBI on crypto assets. In the Financial Stability Report (FSR) released on December 29, the RBI highlighted several concerns on private cryptocurrencies. It indicated several serious implications the instruments pose as immediate risks to customer protection and anti-money laundering (AML) and combating the financing of terrorism (CFT).

The report has further mentioned that private cryptocurrencies needs to be banned because “They are also prone to frauds and to extreme price volatility, given their highly speculative nature. Longer-term concerns relate to capital flow management, financial and macro-economic stability, monetary policy transmission and currency substitution," the report said.

The report explains how the proliferation of private cryptocurrencies across the globe has sensitised regulators and governments to the associated risks, the FSR report said. The report reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the financial system.

“New illicit financing typologies continue to emerge, including the increasing use of virtual-to-virtual layering schemes that attempt to further muddy transactions in a comparatively easy, cheap and anonymous manner,” the report has mentioned. The aggregate market capitalisation of the top 100 cryptocurrencies has reached $2.8 trillion in the emerging market economies that are subject to capital controls, and free accessibility of crypto assets to residents can undermine their capital regulation framework, the report has underlined.

In a media interaction post the MPC announcements, RBI governor Shaktikanta Das reiterated the apex bank's long standing hostile stance of cryptocurrency, stating that "private cryptocurrencies are a big threat to India."