Reiterating his long-standing position, Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday warned that private cryptocurrencies pose a big threat to India’s macroeconomic and financial stability.
At the post-policy meeting with the media, Governor Das said that investors who invest in cryptocurrencies should keep in mind that they were doing so at their own risk. Cryptocurrencies do not have any underlying, not even a tulip, he said. This was a reference to tulipmania, one of the famous market bubbles and crashes of all time, when speculation drove the value of tulip bulbs to extremes in the seventeenth century.
Private cryptocurrencies are a big threat to our macroeconomic and financial stability, Das said. Cryptocurrencies, which have currency-like character, will undermine RBI’s ability to deal with financial stability issues, he added.
Das’s withering assessment of cryptocurrencies comes at a time when the government has moved to tax gains on crypto transactions at 30 per cent.
Many in the industry viewed this as the government softening its stance on such assets and not banning them outrightly, although a 30 per cent tax on income was a bit on the higher side, many had opined. However, they were happy with the fact that at least the government was warming up to the idea of this asset class.
Looking at the magnitude and frequency of transactions in virtual assets, Finance Minister Nirmala Sitharaman decided to tax the income from crypto transactions. She also proposed to provide for Tax Deduction at Source (TDS) for payment made in relation to transfer of virtual digital assets at the rate of 1 per cent to capture the transaction details.
Previously, the RBI governor had stated that the number of users logging into cryptocurrency platforms was “highly exaggerated”. Accounts are being opened for investments as low as Rs 500. Moreover, the central bank received feedback that credit was being provided to open the accounts and boost the numbers. These small-value investors consist of 70-80 per cent of the investor base of these platforms, the governor had said earlier. But he also acknowledged that the value of investments in cryptocurrencies had increased in the country.