- The Reserve Bank of India has issued a new report warning of the dangers of private cryptocurrencies.
- The bank has already called for a total ban on cryptocurrencies, but legal experts say this is unlikely to happen.
India’s central bank, the Reserve Bank of India (RBI), has swapped its long-established anti-crypto position for private cryptocurrencies, warning of its ‘immediate risks’. In a recently published report on financial stability, the bank claims that these crypto assets pose a threat to consumer protection, the fight against money laundering and the fight against terrorist financing. The bank also warned about long-term risks to capital flow management, financial and macroeconomic stability, monetary policy transmission and currency substitution. This report also pointed out in relation to private cryptocurrencies:
They are also prone to fraud and extreme price volatility, due to their highly speculative nature.
Reserve Bank of India on private cryptocurrencies
In addition, the bank of India highlighted its report on the global rise of private cryptocurrencies, which it says has drawn the attention of regulators and governments to its risks. Citing data from the Financial Action Task Force (FATF), the Reserve Bank of India noted an increase in anonymous cryptocurrencies (AEC), decentralized exchange platforms (DEX) and private wallets, among other things. The bank claims that this level of financial anonymity could hurt the country’s economy in the future.
According to the Financial Action Task Force (FATF) 12, anonymity-driven cryptocurrencies (AECs), mixers and tumblers, decentralized exchanges and platforms, privacy wallets and more have increased. Types of products and services that reduce transparency and increase obfuscation of financial flows.
A month ago, India’s former finance minister assured the nation that private cryptocurrencies would not be banned. However, the bank’s expectations may be oriented in a different direction.
Earlier this month, the Reserve Bank of India (RBI) recommended a total ban on cryptocurrencies in the country. The bank’s Board of Directors said at a meeting that crypto assets, among other risks, pose financial stability problems.
At present, it is not clear what direction India will take with cryptocurrencies. Unlike the RBI, the country’s government has supported a more proactive approach to digital assets. Prime Minister Narendra Modi said the country is currently working on a crypto bill. Inside, the government will allow cryptocurrencies as assets but not as a means of payment. The country is working on its own CBDC (digital currency of the central bank): the digital rupee.
However, Indian legal experts consider that it is too late for the country to enforce a total ban on cryptocurrencies. The reasons are that crypto relies on decentralized technology and Indians have already invested billions of dollars in crypto. In addition, major economies, such as the US, have already implemented a total ban on cryptocurrencies. The Reserve Bank of India managed to impose a comprehensive ban in 2018, but the Supreme Court overturned this. Legal experts say the RBI is unlikely to oppose a decision made by the country ‘s leading body.