Former RBI Deputy Governor Pushes for India to Accept Cryptocurrencies

The former deputy governor of the Reserve Bank of India (RBI) has expressed his views on the country’s financial and crypto ecosystem and expressed the need to embrace digital assets.

Speaking at the first HODL’21 virtual conference organized by the Blockchain and Crypto Asset Exchange Committee (BACC) of the Internet and Mobile Association of India (IAMAI) on September 7, Rama Subramaniam Gandhi said cryptocurrencies can be used as a means of payment for economic activities, but he viewed it more as an asset class.

The regulatory landscape in India remains unclear, with politicians still considering bills and legislation. Earlier this month, the government announced that it was drafting a bill that would define cryptocurrencies as commodities, which could be taxed. If the bill is passed, cryptocurrencies would not be used for payments but would be traded and invested as assets.

In 2018, the Reserve Bank of India banned all commercial banks from allowing their customers to conduct cryptocurrency-related transactions, but this ruling was overturned by the Supreme Court in February 2020.

Gandhi, who served at the Reserve Bank of India from 2014 to 2017, insisted that cryptocurrencies need to be treated as an asset or commodity and can be taxed accordingly. Developing a regulatory framework and treating them as commodities will allow Indians to be able to invest in and hold digital assets. He added that if these assets are mined rather than purchased, they should be subject to capital gains tax.

“Cryptocurrencies should be paid out through normal payment channels. If not, they should be considered mined and must be subject to capital gains tax. Just like voluntary disclosure.”

The former central bank deputy governor believes that without regulation or government oversight, cryptocurrencies will be used for crime. He said transactions could be tracked through a central repository to facilitate transactions and prevent illegal use.

Gandhi said governments should be open to economic transactions involving cryptocurrencies, but he warned about the anonymous nature of some blockchains, adding that society must abide by any compliance rules set by the state.

"A country always wants to give its citizens freedom in economic transactions. It enforces contractual obligations and taxes income and gains. So any economic activity should be subject to these kinds of things."