What is RBI’s stand on the use of cryptocurrency

News: RBI governor has raised his concern over the cryptocurrency investment in India.

How the RBI has responded to the crypto business so far?

The RBI has raised its concerns over the usage of a cryptocurrency over macroeconomic and financial stability points. It wants to explore the possibility of Central Bank Digital Currency (CBDC).

How many Indians invest in cryptos and whether the amount is taxed?

According to a newspaper ad, Indians have invested  ₹6 trillion in cryptocurrency. According to the Chief Executive Officer of Wazir X, India has around 15-20 million crypto investors, while it has 25 million mutual fund investors.

Investors are liable to pay tax if they are making gains on cryptocurrency. In the case of active traders, this will be considered as business income and tax will be charged according to the slab rate. In the case of investors, the tax will be charged according to the short-term and long term capital gain.

What are the concerns associated with cryptocurrency?

1) Limit the government to tax the amount as it is difficult to trace. 2) Can be used against various criminal activities like money laundering. 3) Can harm the investors as they will be vulnerable to hacks, scams etc 4) Can harm the lending capacity of banks as more people will invest in cryptocurrency and less in banks.

Source: This post is based on the article “What is RBI’s stand on the use of cryptocurrency” posted in Livemint on 15th November 2021.