‘Can’t be currencies’: FM Nirmala Sitharaman spells out India’s position on crypto

The Web3 sector in India is currently under regulatory support, with the government gradually introducing rules to protect finances related to the digital asset industry. Finance Minister Nirmala Sitharaman was asked on Friday about India’s stance on cryptocurrencies. Sharing his response, the minister said that cryptocurrencies are not considered or perceived as ‘currency’ in India.

Sitharaman was speaking at the India Today Conclave 2024 on Friday when she was asked if the recent bullish movement in the crypto sector has prompted the government to think about the position of cryptocurrencies in India’s financial space.

In answer to the question, Sitharaman it is reported said: “(The government’s) position has always been that assets created in the name of crypto can be trading assets, money-making assets and assets for many other things. And we didn’t regulate them then, and we haven’t regulated them now. But they cannot be currencies and that is the stand of the Government of India.

Sitharaman’s statement comes as the crypto sector is on an upward trajectory. Thanks to a massive inflow of capital into BTC through US-approved ETFs, the price of Bitcoin soared to an all-time high of over $73,700 (roughly Rs. 61 lakh) this week. The most popular cryptocurrencies lagged behind BTC on the growth path, with the crypto market capitalization reaching over $2.7 trillion (approx. Rs. 2,23,78,585 crores).

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

In fact, 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 exodus of investors from the traditional markets space to options like crypto.

However, India’s finance minister maintained a nonchalant approach to the developments currently shaping the crypto industry. She also explained the government’s reason for drawing up a crypto roadmap for the G20 countries under its presidency last year.

“Currencies must be issued with the fiat of the government or central bank of the day. And it is still unregulated in India. If one country regulates it and others don’t, it will be an easy way to transfer money, kick back, finance drugs or even terrorism. That’s why we thought it was appropriate to raise it in the G20 forum because because it is so technology-driven, it will be relevant to cross-border payments,” Sitharaman said.

Powered by blockchain technology, cryptocurrencies such as Bitcoin and Ether are digital assets that carry financial values. As of now, trading and holding cryptocurrencies is not illegal in India. Companies operating in the crypto sector must comply with anti-money laundering laws and KYC mandates to ensure that crypto funds are not misused for illegal activities.

To maintain some tracking of these largely anonymous crypto transactions, the country’s current tax policy imposes one percent TDS on every crypto transaction. A 30 percent tax is also imposed on crypto profits in the country.