Cryptocurrencies could be banned by India's central bank, the government told Parliament on Monday, further complicating the future of the nascent digital asset.
India's central bank, the Reserve Bank of India (RBI) has recommended to the government that it should frame regulations for cryptocurrencies and prohibit them, though it has opined a "global collaboration" is needed for any effective regulation or ban.
"In view of the concerns expressed by the RBI on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country, the RBI has recommended for framing of legislation on this sector.
"The RBI is of the view that cryptocurrencies should be prohibited," Indian finance minister Nirmala Sitharaman said in a written response to a question in the lower house of Parliament.
Due to cryptocurrencies' borderless nature, Sitharaman noted that international collaboration was required to prevent any regulatory arbitrage.
The Indian government is currently working on a crypto consultation paper and said in late May that the paper laying out its stance on crypto was "almost ready", but it has not yet been released.
Despite repeated requests, the Indian government has refused to make its stance on cryptos public and confusion abounds regarding their classification: and whether they are financial assets or commodities.
Both Sitharaman and Prime Minister Modi have called for joint global action in recent months to address crypto's problems.
In the meantime, the RBI is said to be working on its own digital currency, which it hopes to introduce this year.
According to RBI deputy governor T Rabi Sankar, Central Bank Digital Currencies could "kill" the reasons for the existence of private cryptocurrencies.