Finance Minister Nirmala Sitharaman on Monday raised concerns on the risks of cryptos being exchanged in an unregulated environment and highlighted the importance for global efforts and central bank-driven digital currency. She was participating in a high-level panel discussion on "Money at a Crossroad" hosted by Kristalina Georgieva, managing director, International Monetary Fund (IMF) on Monday in the US.
“Currency is that which is backed by a bank, the central bank of the country or the government of that country. So that is yet to happen in our country, and it is going to happen sometime this year,” she said.
Sitharaman is on an official visit to the US and was speaking at the Spring Meetings of IMF on April 18.
Raising concerns over money laundering in new digital assets, she said India wanted to ensure that crypto transactions would eventually become compliant with anti-money laundering rules, and don't end up inadvertently funding any kind of terror activities.
It is important that the government keeps an eye on such activities “and there should be a financial implication on them and therefore the tax, it wasn't as if we have legitimized them," said the finance minister, clarifying that the tax did not amount to regulation of cryptos.
Sitharaman talked about the risks in digital currencies or digital assets that exist in the non-governmental domain. “The risk which worries me more on the non-governmental domain is essentially that you're looking at unhosted wallets from across the globe,” she said.
Highlighting the importance of concerted global efforts, she noted that regulation cannot be brought about by a single country, adding that there were challenges in bringing in a global regulation. “Technology doesn't have a solution which will be acceptable to various sovereigns at the same time applicable within each of the territories. As long as the non-governmental activity of the crypto assets is through unhosted wallets, regulation is going to be very difficult,” she said.
Cross-border payments will become effective with central bank-driven currencies, and lead to better management of large payments between countries, she added.
Elaborating on the logic of bringing in a steep transaction on cryptos, Sitharaman said that since the volumes of such transactions were huge, there was no regulatory mechanism looking at them, and there was no way to keep a track of these transactions, the government announced that the income generated should be taxed at 30 per cent.
Sitahraman said that the Indian government spent a lot of time over the last decade trying to build the digital infrastructure framework.
Talking about biometric identity through Aadhaar, she said, "We have ensured that we have brought in data security and data privacy elements.”
She spoke about the creation of India Stack, an indigenously developed, technology-driven enabler to host innovations such as API platforms. The finance minister noted that the Indian government has created a database on the platform, which is used for the goods and services tax network and made sure that the bills payment systems and the Unified Payment Interface have all been created under the India stack.