Crypto can’t be treated as sovereign currencies, Centre agrees with RBI

The Centre, in principle, agrees with the Reserve Bank of India that cryptocurrencies cannot be treated as sovereign currencies, but it is not in favour of banning the blockchain technology that operates them because of its potential to further boost the fintech industry using it.

The Centre, in principle, agrees with the Reserve Bank of India that cryptocurrencies cannot be treated as sovereign currencies, but it is not in favour of banning the blockchain technology that operates them because of its potential to further boost the fintech industry using it, two officials aware of the development said.

"Blockchain technology can be regulated to leverage its usage in various non-controversial products and services, instead of killing a futuristic technology by outrightly banning it," one of them said.

According to the officials, this matter is expected to be discussed at the first G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under the G20 Indian Presidency is scheduled on24-25 February in Bengaluru.

"There are three broad aspects related to cryptos – crypto currencies, crypto assets and blockchain technology – and while many countries are against granting legitimacy to cryptocurrencies such as Bitcoins to compete with sovereign fiat money, they are quite open to discussing the other two ," a second official said. Neither wished to be identified.

After the customary post-budget address to the RBI board on 11 February in the capital, Union finance minister Nirmala Sitharaman said that G20 countries are discussing whether crypto assets should be regulated, and , if so, a common ground for such oversight. The FMCBG meeting will be attended by 72 delegates, including finance ministers and central bank governors of the G20 members, invitees and heads of multilateral organisations.

According to the second official, RBI has already registered its concerns over the adverse effect of cryptocurrency on the Indian economy. The government, however, believes that any unilateral ban or regulation would not be effective because of the cryptic and borderless nature of cryptocurrencies, and that international collaboration is needed to prevent regulatory arbitrage, this person added.

The FMCBG meeting at Bengaluru will be jointly chaired by Sitharaman and RBI Governor Shaktikanta Das. It will be preceded by a meeting of G20 Finance and Central Bank Deputies (FCBD) on 22 February 2023, co-chaired by economic affairs secretary Ajay Seth and RBI deputy governor Michael D Patra.

Union Minister for Information and Broadcasting, and Youth Affairs and Sports Anurag Thakur, will inaugurate the FCBD meeting.

The FMCBG meeting , spread over three sessions on 24-25 February , will cover issues such as strengthening multilateral development banks, financing for resilient, inclusive and sustainable "cities of tomorrow", leveraging Digital Public Infrastructure (DPI) for advancing financial inclusion and productivity gains.