‘It can’t be currencies’: FM Nirmala Sitharaman explains India’s stance on cryptocurrencies

The Web3 sector in India is currently undergoing regulatory maintenance, with the government gradually implementing regulations to safeguard the finances involved in the digital asset sector. Finance Minister Nirmala Sitharaman was asked on Friday about India’s stand on the matter cryptocurrencies. Sharing his response, the minister said that cryptocurrencies are not seen or perceived as ‘currency’ in India.

Sitharaman spoke at the India Today Conclave 2024 on Friday when asked whether the recent bull run in the cryptocurrency sector had made the government think about the position of cryptocurrencies in the Indian financial space.

In response to the question, Sitharaman reportedly said: “Its (the government’s) position has always been this, that assets created in the name of cryptocurrencies can be assets for trading, assets for making money and assets for many other things. We didn’t regulate them then and we don’t regulate them now. But they cannot be currencies and this is the position of the Indian government.”

Sitharaman’s statement comes as the cryptocurrency sector is on an upward trajectory. Due to a massive influx of capital into BTC through US-approved ETFs, This week the price of Bitcoin rose to an all-time high of over $73,700 (around Rs. 61 lakh). The most popular cryptocurrencies fell behind BTC in the wake of the surge, taking the cryptocurrency market capitalization to over $2.7 trillion (approximately Rs. 2,23,78,585 crore).

With features such as instant payments of large payments, low-cost cross-border money transfers, anonymous transactions, and the ability to support tokenization, the cryptocurrency sector offers several reasons for investors to consider them as an alternative to traditional markets.

Indeed, earlier this week, the head of the Securities and Exchange Board of India (SEBI) cited some of these crypto features, while addressing concerns about a potential investor exodus from the traditional markets space towards options like cryptocurrencies.

India’s finance minister, however, has maintained a dispassionate approach towards the developments currently shaping the cryptocurrency sector. He also explained why the government drafted a Crypto roadmap for the G20 nations under his presidency last year.

“Currencies must be issued by decree of the government or central bank of the day. And in India it is still not regulated. If one country regulates it and others don’t, it will be an easy way to move money, make round trips, finance drugs or even terrorism. This is why we felt it was appropriate to raise this in the G20 forum, because being so technology-driven, it will impact cross-border payments,” Sitharaman added.

Supported by blockchain technologies, cryptocurrencies such as Bitcoin AND Ether they are digital assets that carry financial values. For now, trading and holding cryptocurrencies is not illegal in India. Companies operating in the cryptocurrency industry must comply with anti-money laundering laws and KYC mandates to ensure that crypto funds are not misused for illegal activities.

To keep a record of these largely anonymous crypto transactions, the current fiscal policy in the country imposes 1% TDS on every crypto transaction. The country also imposes a 30% tax on cryptocurrency profits.

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