Reserve Bank of India (RBI) had never lent out any sort of recognition nor any support to digital currencies ever, however, it has been continuously discouraging Indian to beware of them because they are instruments of “fraud” and “consumers’ nightmare”. It recently shared the same point of view when RBI said that engaging with cryptocurrencies may lead to consumers’ nightmares and expose them to risks of fraud and extreme volatility.
The Financial Stability Report has recently been compiled and made public by the Reserve Bank of India (RBI). The report is comprehensive in nature as it expands over 150 pages and also discusses the nature of “cryptocurrencies” in the state. On page 144 of the report, however, RBI discusses the risks that are being posed by the usage of digital currencies in India.
On this very page, the Bank deliberately used the word “private” for suggesting that private cryptocurrencies pose high risks. The word “private” could simply mean all cryptocurrencies which may include cryptocurrencies such as Ethereum and Bitcoin.
RBI commented that the mass adoption of digital currencies around the world has concerned worldwide regulators to assess risks associated with them. Furthermore, RBI stated that cryptocurrencies are not prone to misuse and in fact, they are instruments of fraud and aiders of financial crimes. Above all, they pose huge risks against consumer protection and may lead to the worst nightmares of the consumers, said RBI.
Describing the risks further, RBI also commented that digital currencies are not immune to volatility instead the volatility is humongous. Investors must therefore avoid them for the present and future times to come.
RBI’s report also makes mention of the findings of the Financial Action Task Force (FATF). In these findings, FATF has also endorsed that crypto is increasingly being used to commit financial crimes of money laundering and terror funding.
On the other hand, the Indian Government too is also bent upon banning the use of cryptocurrencies in the country. The majority of people within the Indian Government have been supporting the crypto ban proposal. Even the discussion in the Indian Parliament is also supporting the argument that crypto must be banned.
However, the Indian crypto economy has grown into hundreds of billions of dollars. Investors had and have been putting their funds into Bitcoin, Ethereum, and other prominent cryptocurrencies. Also, there are also several internationally leading crypto exchanges that have established their branches in India. Especially at the start of 2020, India became joined several other countries where crypto adoption was rapidly increasing.
As of today, India holds second place amongst the countries where crypto is being widely adopted. RBI’s and Indian Government’s statements are therefore causing huge unrest amongst Indian crypto investors and exchanges. They are arguing that crypto volatility wouldn’t do as much damage as banning cryptocurrencies.