‘Cannot Be Currencies’: FM Nirmala Sitharaman Spells India’s Stance on Crypto

The Web3 sector in India is currently under regulatory maintenance, with the government gradually deploying rules to safeguard the finances involved with the digital assets industry. Finance Minister Nirmala Sitharaman was asked Friday about India’s stance on cryptocurrencies. Sharing her response, the minister said that cryptocurrencies were not seen or perceived as ‘currency’ in India.

Sitharaman was speaking at the India Today Conclave 2024 on Friday when she was asked if the recent bull run in the crypto sector had nudged to government to think about the position of cryptocurrencies in India’s financial space.

In response to the question, Sitharaman reportedly said, “Its (the government’s) position has always been this, that assets created in the name of crypto can be assets for trading, assets for money making and assets for many other things. We haven’t regulated them then, and we haven’t regulated them now. But they cannot be currencies and that’s the Government of India’s position.”

Sitharaman’s statement comes when the crypto sector is on an upward trajectory. Owing to a massive inflow of capital into BTC through US-approved ETFs, Bitcoin price surged to an all-time high of over $73,700 (roughly Rs. 61 lakh) this week. Most popular cryptocurrencies tailed behind BTC on the surge trail, taking the crypto market capitalisation to over $2.7 trillion (roughly Rs. 2,23,78,585 crore).

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

In fact, earlier this week, the chief of the Securities and Exchange Board of India (SEBI) cited some of these crypto features while addressing concerns around a potential investor exodus from the traditional markets space towards options like crypto.

The Indian finance minister, however, maintained an unfazed approach towards the developments currently shaping the crypto industry. She also explained the government’s reason of drafting a crypto roadmap for the G20 nations under its presidency last year.

“Currencies are to be issued with a fiat of the government or the 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 of moving money, round-tripping, funding drugs or even terrorism. That is why we thought it fit to raise it in the G20 forum, because as it is so technology-driven, it will have a bearing on cross-border payments,” Sitharaman reportedly added.

Supported by blockchain technologies, cryptocurrencies like Bitcoin and Ether are digital assets that carry financial values. For 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 crypto funds are not misused for unlawful activities.

To maintain some track of these largely anonymous crypto transactions, the current taxation policy in the country mandates one percent TDS on each crypto transaction. A tax of 30 percent is also levied on crypto profits in the country.