FameEX Hot Topics | India's IT Minister Supports RBI's Cautious Approach Towards Digital Currencies

India's IT Minister, Ashwini Vaishnaw, recently spoke at the Times Network India Digital Fest 2023 and shared his thoughts on the impact of the incoming Digital India Act on the digital currency sector. According to Vaishnaw, the Act aims to transform India's digital economy into a $1 trillion industry before 2028 by promoting the adoption of blockchain. However, the Minister also noted that a separate regulation will be launched for digital currencies to enable efficient control of the budding sector.

Vaishnaw emphasized the importance of trusting the Reserve Bank of India's lead on digital currency regulation, stating that the central bank has done an excellent job in navigating the economy through difficult global economic patches. The Minister confirmed that digital currencies are legal in India, but under the condition that citizens interested in trading them do so under authorized routes in compliance with the Foreign Exchange Management Act (FEMA).

Despite the legality of digital currencies in India, experts have noted that the government stifles innovation through draconian tax measures. India imposes a 30% tax on digital asset trading and a 1% tax deductible at source (TDS), sparking industry-wide condemnation. Plans for a nationwide digital currency regulation have been put on hold in favor of a global regulatory framework that India says it will pursue as part of its G20 presidency. Finance Minister Nirmala Sitharaman confirmed that plans are underway with the International Monetary Fund (IMF) and other financial agencies offering suggestions.

Sitharaman stressed the need for a standard operating procedure that everyone follows to make a regulatory framework effective, stating that "if it requires regulation, then one country alone cannot do anything." India's move to collaborate on a global regulatory framework follows the recent collapses of centralized entities like FTX and U.S. banking entities that have stoked the flames of tighter regulation in the country. Vaishnaw reiterated that no government wants to build downside risk at a time when there is so much turbulence and uncertainty in the world. While the Digital India Act is poised to transform the digital economy, Vaishnaw emphasized the need for cautious approaches towards digital currencies, citing their intersection with the macroeconomy and financial sector.

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