Finance Minister Nirmala Sitharaman addressed the Lok Sabha, highlighting that the Reserve Bank of India (RBI) has recommended that the government frame regulations for cryptocurrencies. According to Sitharaman, the Indian government seeks international collaboration to implement such a ban effectively.

Responding to cryptocurrency-related queries, Sitharaman stated that the RBI has advised framing legislation for the sector, emphasizing that cryptocurrencies should be prohibited. She pointed out that due to their borderless nature, international collaboration is essential to prevent regulatory arbitrage. Any effective legislation must involve significant international cooperation to evaluate risks, benefits, and establish common standards.

When asked whether the RBI has issued instructions regarding cryptocurrencies in the past decade, Sitharaman confirmed that the RBI has cautioned users, holders, and traders of virtual currencies (VCs) through public notices on several occasions since December 2013. The RBI highlighted the potential economic, financial, operational, legal, customer protection, and security risks associated with VCs. In April 2018, the RBI issued a circular prohibiting its regulated entities from dealing in VCs or providing services for facilitating transactions involving VCs.

Furthermore, Sitharaman mentioned that in May 2021, the RBI advised its regulated entities to continue due diligence processes for VC transactions, in line with Know Your Customer (KYC), Anti-Money Laundering (AML), Combating Financing of Terrorism (CFT) standards, and the Prevention of Money Laundering Act (PMLA), 2002. Entities must also ensure compliance with the Foreign Exchange Management Act (FEMA) for overseas remittances. Sitharaman reiterated the RBI's stance that cryptocurrencies do not qualify as currency since modern currencies must be issued by a central bank or government. The value of fiat currencies is supported by monetary policy and legal tender status, whereas cryptocurrencies' value is based on speculation and expectations of high returns, which could destabilize a country's monetary and fiscal stability.

RBI Governor Shaktikanta Das has consistently warned about the dangers of digital assets. In RBI's annual report, he described cryptocurrencies as a "clear danger," equating them to speculative investments without any underlying value. Despite these warnings, the government has imposed taxes on virtual assets. A 30% tax on gains from virtual currency assets took effect on April 1, and a 1% TDS was added from July 1, affecting trading volumes on Indian cryptocurrency exchanges.