Indian FM: Government and RBI in Complete Harmony on Crypto and CBDC

A fortnight packed with important developments on the economic front, Indian Finance Minister Nirmala Sitharaman and Governor of India’s central bank Shaktikanta Das told the media that there is complete harmony between the two government bodies on the cryptocurrency front.

Crypto Makes Headlines in India

In the budget presentation for 2022-23 on February 1, Sitharaman proposed a flat 30% tax on all incomes from crypto activities. She also announced the introduction of central bank digital currency (CBDC) from the next fiscal beginning April 2022.

On February 3, Indian Prime Minister Narendra Modi stressed that the Indian CBDC could strengthen the digital economy.

Later, during her reply to the discussion on February 11, the Indian Finance Minister clarified that bringing crypto transactions into the tax net doesn’t mean the government has legalized such assets, despite numerous rumors in the community.

“Banning or not banning will come subsequently when the consultation gives me inputs but then would you rather have me not tax and allow the profits to be there. I will tax because its sovereign right [of the government] to tax,” she had added.

Government and RBI Are on the Same Page

Both the Indian Finance Minister and the chief of the central bank asserted that there are internal discussions taking place a CBDC and cryptocurrencies, and both are aware of each other’s sensitivities on these issues.

“With RBI and Ministry, not just on crypto but on every other thing as well, I think there’s complete harmony with which we’re working, respecting each other’s domain also knowing what we’ve to do with each other’s priorities and in the interest of the nation. There’s no turfing here,” Sitharaman said at a press conference after the meeting RBI’s central board.

Talking about consultations on CBDC, RBI Governor Das clarified, “Like several other issues, this particular issue is internally under discussion between RBI and Government. Whatever points we have, we discussed with [the] government. Beyond that, I think, I will not like to further elaborate.”

Why Today’s Meeting is Important?

After deftly handling the contentious issue of cryptocurrency through the annual budget 2022-23, Indian Finance Minister Nirmala Sitharaman appeared publicly for the first time with the RBI Governor Shaktikanta Das on Monday.

Besides reiterating their stance on crypto, what caught everyone’s attention were the yellow roses on the dais, the predominantly yellow sari of the Indian Finance Minister, and the yellow facemask of the RBI Governor. In this part of the world, yellow signifies union/marriage.

In a deft move, Sitharaman delinked RBI’s CBDC plans from the general debate on crypto in her budget proposals. While she allowed the RBI to go ahead with the launch of CBDC, she brought crypto activities. This was without explicitly saying whether digital assets such as bitcoin or ethereum are legal or not.

Politically, it was seen as a smart decision for the government that helped it wriggle out of a difficult spot where pro- and anti-crypto opinions had become highly polarized.

To many, it was also a rebuff to the RBI Governor, who has been highly critical of cryptocurrencies, asserting that they can destabilize the economy.

Today both the Indian FM and the RBI Governor seemed to clear the air saying they are working in complete “harmony.”

Featured Image Courtesy of Times of India