India IT minister wary of digital currencies, sides with RBI for cautious approach

India’s Minister of Information Technology Rajeev Chandrasekhar has disclosed that the country will continue its slow-and-steady approach toward digital currencies, according to the Economic Times.

Chandrasekhar noted that the incoming Digital India Act is poised to transform India’s digital economy into a $1 trillion industry before 2028. Chandrasekhar spoke at the Times Network India Digital Fest 2023, sharing his opinion on the incoming regulation and its impact on the digital currency sector.

The IT Minister stated that the proposed Digital India Act would promote the adoption of blockchain, given the myriad benefits it could bring to the local economy. However, Chandrasekhar pointed out that since digital currencies intersect with the macroeconomy and financial sector, a separate regulation will be launched for efficient control of the budding sector.

“No government in the world today wants to build downside risk at a time when there is so much turbulence and uncertainty in the world,” Chandrasekhar said. “Just because it sounds like an innovative, fashionable thing to do, we should not be rushing headlong into saying crypto is right and crypto is good.”

The recent collapses of centralized entities like FTX and U.S. banking entities have stoked the flames of tighter regulation in India. Chandrasekhar took the opportunity to urge citizens to trust the Reserve Bank of India’s (RBI) lead on digital currency regulation on the grounds that the central bank has “done an excellent job” in navigating the economy through difficult global economic patches.

The Minister confirmed that digital currencies enjoy the status of legality in India but under the condition that citizens interested in trading them do so under authorized routes in compliance with the Foreign Exchange Management Act (FEMA).

Despite claims that digital currencies have legal status in the country, experts have noted that the government stifles innovation through draconian tax measures. India imposes a 30% tax on digital asset trading and a 1% tax deductible at source (TDS), sparking industry-wide condemnation.

G20 presidency for global digital currency regulations

Plans for a nationwide digital currency regulation have been shelved in favor of a global regulatory framework which India says it will be pursuing as part of its G20 presidency. Finance Minister Nirmala Sitharaman confirmed that plans are underway with the International Monetary Fund (IMF) and other financial agencies offering suggestions.

“We are talking to all nations, that if it requires regulation, then one country alone cannot do anything,” Sitharaman said. “We are talking with all nations, if we can make some standard operating procedure which everyone follows to make a regulatory framework, and if it can be effective.”

A meeting between the G20 central governors and finance ministers concluded in February showed glimpses of promise as the country moves to stifle incidences of “regulatory arbitrage” and “cryptoization.”

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