The Government of India announces before the Parliament the intentions of the Central Bank of India to ban cryptocurrencies in the country, considering them a pyramid scam.
While some countries, such as El Salvador, turn such a popular cryptocurrency as Bitcoin into legal tender, others, such as China, prohibit any operation with them. An assumption that is now also going to happen in India, as announced by the country’s government in parliament on Monday.
Nirmala Sitharaman, India’s Finance Minister, has stated that the Central Bank of India has expressed its concern about the “destabilizing effects of cryptocurrencies on the monetary and fiscal stability of the country”, currently the second largest Internet market in the world. The recommendation made by the monetary institution is to draft legislation as restrictive as possible in this regard, since its view on cryptocurrencies is that they should be banned.
Awaiting the G20 meeting
The Financial Stability Board, a body made up of members of the treasury and central banks of G20 countries, including India, had already proposed earlier this July that very strict regulations be proposed at the meeting that this body has scheduled for October 2022.
The reasons would be the predominantly speculative use made of cryptocurrencies and that they do not operate in a market free of regulations. Only on the basis of effective international collaboration and after assessing the potential risks and benefits of the evolution of the common economy could a normative regulation of these assets become effective.
Stringent taxes on cryptocurrency trading were already in place in India earlier this year, which at the time was seen as the first move by the country’s central bank to try to control speculative movements in the sector, but gradually more severe limitations have been applied to cryptocurrency trading management platforms.
Pyramid scam and lack of characteristics as a currency or commodity
Already in February the position of the Central Bank of India, in the words of its deputy governor T. Rabi Sankar, was very strict, when in a statement on cryptocurrencies he compared them to Ponzi scheme-based pyramid schemes, explaining that they were “specifically developed to circumvent the regulated financial system”.
The Central Bank of India directly alluded to the example of the famous tulip crisis of the 17th century. The institution does not consider cryptocurrencies as currencies, assets or commodities, lacking intrinsic value or underlying cash flows.