In her speech at the International Monetary Fund (IMF) in Washington, Indian Finance Minister Nirmala Sitharaman highlighted India’s journey in the cryptocurrency world. She also stated that digital currency came with big risks. It is no secret that India has not been very eager to accept crypto-currencies in the first place, since they came into vogue. And the recent statement by the Finance Minister has brought out the country’s concerns regarding the matter to the forefront.
What did Nirmala Sitharaman say?
The Finance Minister, in her address at the spring meet of the IMF, said that at a time like the present, when the FinTech revolution is taking over the world, cryptocurrencies do pose a risk for money laundering and terror financing. "I think the biggest risk for all countries across the board will be the money laundering aspect and also the aspect of currency being used for financing terror," she was quoted saying by ANI.
She has highlighted the big concerns associated with the growing popularity of digital currencies. This came as a part of a high-level panel discussion "Money at a Crossroad" hosted by Kristalina Georgieva, Managing Director of IMF. The discussion was primarily based on how fast and in what magnitude digital wealth was augmenting around the world.
Why is the Finance Minister’s statement important?
The Minister’s statement comes at a time when India, along with countries all over the globe, is witnessing a growing digital revolution. India, especially, has been struggling to take count of the growing digital assets possessed by its citizens. It still continues to do so. And the Finance Minister’s words have highlighted the country’s concerns, the issues it is currently facing and its anxiety over the unfortunate fact that there is no clear solution ahead.
What is the issue with crypto? Why money laundering and terror financing?
The investments made to buy cryptocurrencies are made using trading platforms. These trading platforms are either owned or have been invested in by various companies, the whereabouts of which are not always easy to trace. Some of these companies also act as regional subsidiaries of other companies based in countries where terror funding or activities are active.
After a person invests the money, there is no way of finding out where the money goes or what purpose it will be used for by the owning companies or individuals. In such a situation, terror funding and money laundering are very much possible.
The solution?
"I think regulation using technology is the only answer. Regulation using technology will have to be so adept, that it has to be not behind the curve, but be sure that it is on the top of it. And that's not possible. If any one country thinks that it can handle it, it has to be across the board," said Sitharaman in the ANI report. It is evident from these words that there is no specific solution as yet. There have been no laws formed to monitor or regulate the use of technology in the matter.
Then how has India been dealing with this situation?
Sitharaman said that the country has been dealing with the issue for a decade with the government trying to build up a digital infrastructure. India had put a ban on these digital currencies since they became popular and even common people started investing in them. The Finance Minister had then stated that India considered the digital currencies illegal and would not recognise them. However, when several Indians continued to invest despite the ban, India revoked the ban and made the gains earned through the possession of the cryptocurrencies taxable under a 30% tax window. This window is to stay till the next year’s budget.
What now?
Through the 2022 budget, India finally recognised crypto-related assets. Owning to the popularity of digital currencies, India has also announced that it would launch its own cryptocurrency. Though no such currency has come up so far, digital trading platforms/companies have found growth in the country. Indian investors have also come to own shares in some companies. With this, cryptocurrencies have also become easier to invest in and the units can be bought by anyone, even with investments amounting to as less as a Rs 100.
