- The Reserve Bank of India has issued a fresh report warning of the dangers brought on by private cryptocurrencies.
- The bank has previously called on an outright crypto ban, but legal experts say this is unlikely to happen.
India’s central bank- the Reserve Bank of India (RBI), has now turned its long-held anti-crypto stance to private cryptocurrencies, warning of their “immediate risks.” In a recently published financial stability report, the bank claims such crypto-assets pose a threat to consumer protection, anti-money laundering, and the fight against terrorism financing. The bank also warned of long-term risks to capital flow management, financial and macro-economic stability, monetary policy transmission, and currency substitution. The report also noted this of private cryptocurrencies:
They are also prone to frauds and extreme price volatility, given their highly speculative nature.
Reserve Bank of India on private cryptocurrencies
Additionally, the Indian bank highlighted in its report the global escalation in private cryptocurrencies – something it says has called on the attention of regulators and governments on their risks. Citing data from the Financial Action Task Force (FATF), the RBI noted that there has been a surge in anonymity-enhanced cryptocurrencies (AECs), decentralized exchange (DEX) platforms, and private wallets among others. The bank says this level of financial anonymity may potentially damage the country’s economy in the future.
According to the Financial Action Task Force (FATF)12, the virtual asset ecosystem has seen the rise of anonymity-enhanced cryptocurrencies (AECs), mixers and tumblers, decentralized platforms and exchanges, privacy wallets, and other types of products and services that enable or allow for reduced transparency and increased obfuscation of financial flows.
A month ago, India’s former finance minister assured the nation that there would be no ban on private cryptocurrencies. However, the bank’s outlook may point in a different direction.
Key notes
Earlier this month, the RBI championed a blanket ban on cryptocurrencies in India. The bank’s Central Board of Directors said in a meeting that crypto-assets pose financial stability concerns among other risks.
Presently, it is unclear which direction India will take with cryptocurrencies. Contrary to the RBI, the nation’s government has supported a more accommodative approach to digital assets. Prime Minister Narendra Modi said the nation is currently working on a crypto bill. In it, the government will permit cryptocurrencies as assets but not as a means of payment. The country is also working on its own CBDC (central bank digital currency) – the Digital Rupee.
Nonetheless, legal experts in India have it that it is too late for the country to enforce an outright ban on cryptocurrencies. The reasons are that crypto is supported by decentralized tech and Indians have already invested billions of dollars in crypto. Even more, major economies such as the US have already ruled out a complete crypto ban. The RBI managed to instill a complete ban in 2018, but this was overruled by the Supreme Court. Legal experts say it is hard for the RBI to go against a decision made by the country’s most prestigious body.
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