India ready with consultation paper on cryptocurrencies: Economic Affairs Secretary

Economic affairs secretary Ajay Seth on Monday said that the Inflation in India should moderate in coming months and the government is ready with its consultation paper on cryptocurrencies. According to Seth, there needed to be a global consensus reached on cryptocurrencies and India would look at regulations enforced in other countries before deciding how it would regulate, reports Reuters.

In the annual budget this year the government said it would tax gains made through cryptocurrency investments at 30 percent but the country has still not given the measure legal status.

Reserve Bank of India (RBI) governor Shaktikanta Das recently cautioned against the use of cryptocurrencies in India saying that the virtual currency could impact the financial stability of the country. In an interview with CNBC TV18, Das also said that cryptocurrencies could also impact the macroeconomic stability of the country.

The RBI governor also said that if cryptocurrencies had been regulated in India leading to Terra Luna, investors would have questioned the effectiveness of the law adding that RBI and the government were ‘in sync’ as far as regulating cryptocurrencies was concerned. “We have conveyed our position to the government and they will take a considered call,” he added.

More recently, the RBI official cautioned that use of cryptocurrencies that are based on the US Dollar could lead to the ‘dollarisation’ of India’s economy.

“Thus, increased acceptance of cryptocurrencies would result in effective ‘Dollarization’ of our economy6. Dollarization, it is well understood, would undermine the ability of authorities to control money supply or interest rates, as monetary policy would not have any impact on the non-Rupee currencies or payment instruments,” RBI Deputy Governor, T Rabi Sankar had said in a speech earlier this month.

“When that happens, India loses not just its currency, a defining feature of its sovereignty, but its policy control of the economy. With loss of traction for monetary policy, the ability to control inflation would be materially weakened,” he had added.

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