Blanket ban on crypto not desirable: Dr Bimal Jalan

In an interview with TNIE, former RBI governor suggests framework to regulate the currency, ensure transparency.
For representational purposes (File Photo | Reuters)
For representational purposes (File Photo | Reuters)

Cryptocurrencies should be classified as currency (not as legal tender) and the central bank, in consultation with the government, should be its regulator, according to Dr Bimal Jalan, former Governor of the Reserve Bank of India (RBI). He added that a blanket ban on cryptocurrencies isn’t desirable and once it’s classified as currency, the government can deliberate on the taxation aspects and at what tax rate capital gains on cryptocurrencies can be imposed.

“They (cryptocurrencies) are ok, but should be regulated and have transparency. A blanket ban is not desirable as they exist all over the world. A ban is not appropriate. What we need is a regulatory framework, ensuring transparency,” Jalan told TNIE. But without regulation, he believes it’s better not to have cryptocurrencies at all.RBI has maintained that cryptocurrencies were a serious concern and shouldn’t be permitted given the challenges they can pose for macroeconomic and financial sector stability.

“The central bank should be the regulator and make sure whatever is done in cryptocurrencies, the data is available to the public, which is not so today. Data should be public just as today we know how much money is introduced by RBI and by the government in terms of borrowings and others...same thing should happen with crypto and digital currencies,” Jalan added.

Governments are divided on categorising cryptos. If some countries like El Salvador approved Bitcoin as legal tender, others like China have imposed stringent regulations. 

Meanwhile, another former RBI Governor Duvvuri Subbarao has said the central bank could lose control over money supply and inflation management if cryptocurrency is allowed in the country. Speaking at a webinar, Rao also said India’s case for issuing a central bank digital currency (CBDC) may not be strong as there are capital controls.

“Crypto is backed by algorithms and there is fear that the central bank might lose control over money supply and inflation management. There are also concerns that crypto will disrupt monetary policy,” he said on Wednesday.

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 seeks to create a facilitative framework for the creation of the official digital currency to be issued by the RBI. The Bill also seeks to prohibit all private cryptocurrencies, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.

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