India’s Finance Minister says crypto could be used for illicit activities

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India’s Min­is­ter of Finance, Nir­mala Sithara­man, believes cryp­to can help facil­i­tate ter­ror­ist financ­ing and mon­ey laun­der­ing. She said this dur­ing the G20 Finance Min­is­ters meet­ing and the Cen­tral Bank Gov­er­nor Meet­ing (FMCBG) Spring Meet­ings in Wash­ing­ton DC.

Sithara­man par­tic­i­pat­ed in the Mon­ey at a Cross­road pan­el dis­cus­sion host­ed by Kristali­na Georgie­va, IMF’s Man­ag­ing Direc­tor. She point­ed out that Dig­i­tal Mon­ey will inevitably play a sig­nif­i­cant role.

Talk­ing about crypto’s abil­i­ty to facil­i­tate illic­it activ­i­ties, she said,

“I think the biggest risk for all coun­tries across the board will be the mon­ey laun­der­ing aspect and also the aspect of cur­ren­cy being used for financ­ing terror.”

Sithara­man added,

“I think reg­u­la­tion using tech­nol­o­gy is the only answer. Reg­u­la­tion using tech­nol­o­gy will have to be so adept, that it has to be not behind the curve, but be sure that it is on the top of it. And that’s not pos­si­ble. If any one coun­try thinks that it can han­dle it. It has to be across the board.”

Accord­ing to her, the Indi­an gov­ern­ment has been ramp­ing up efforts to build the country’s dig­i­tal infra­struc­ture, espe­cial­ly after the COVID-19 pan­dem­ic result­ed in a sharp uptick in the dig­i­tal adop­tion rate.

She cit­ed data from 2019, which shows the dig­i­tal adop­tion rate in India increased to approx­i­mate­ly 85%. On the oth­er hand, the glob­al adop­tion rate stood at around 64%. With this data in mind, Sithara­man said the pan­dem­ic peri­od helped India test and prove that using dig­i­tal mon­ey is sim­ple and every­one can use it.

India’s crypto tax rules take a toll on the market

Sitharaman’s vis­it to Wash­ing­ton comes after India enact­ed its new cryp­to tax rules at the begin­ning of the month. The coun­try cur­rent­ly impos­es a 30% tax on prof­its from cryp­to trans­ac­tions. Addi­tion­al­ly, India does not allow cryp­to adopters to off­set gains with loss­es from pre­vi­ous transactions.

As a result of the new strict tax­a­tion rules, cryp­to trad­ing vol­umes across exchanges in the coun­try plum­met­ed. Also, India seeks to intro­duce a 1% tax deduct­ed at source (TDS) on July 1. Experts pre­dict that this tax will exac­er­bate the cur­rent situation.

Mean­while, reg­u­la­to­ry woes con­tin­ue plagu­ing the Indi­an cryp­to sec­tor. Sev­er­al cryp­to exchanges in India have sus­pend­ed fiat deposits through the Unit­ed Pay­ments Inter­face (UPI) in the past week. Report­ed­ly, UPI’s oper­a­tor, the Nation­al Pay­ments Cor­po­ra­tion of India (NPCI), said it was unaware cryp­to exchanges were using the pay­ments system.

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