RBI tells Indian panel crypto should not be legal, flags terror risk

The Reserve Bank of India told a parliamentary panel Thursday that virtual digital assets like cryptocurrency should not be legalised, describing them as a threat to an emerging economy and a channel for terror funding and narcotics smuggling, people familiar with the discussions said.

The central bank made the submission to the Parliamentary Standing Committee on Finance, chaired by BJP member Bhartruhari Mahtab. The RBI said China and Qatar have outright bans on such financial activities, while Europe allows virtual digital assets under stringent regulation. Offshore entities involved in crypto trade are difficult for authorities to track, the central bank added.

The Institute of Chartered Accountants of India, which also appeared before the committee, backed a comprehensive law for virtual digital assets. ICAI said it could provide principle-based guidance on recognising, measuring, presenting, and disclosing VDAs in financial statements, strengthening reporting and compliance frameworks.

After the meeting, Mahtab told reporters the RBI is against legalising VDAs. The committee has been auditing parts of the sector under existing income tax law, he said.

The RBI's opposition is consistent with its earlier positions. The central bank effectively banned banks from servicing crypto firms in 2018. The Supreme Court overturned that ban in 2020. The government has not introduced a comprehensive crypto bill. A 30% tax on gains and a 1% tax deducted at source remain the only codified rules.

The committee's study on virtual digital assets and the way forward is ongoing. No date has been set for its next meeting or a final report.