Reserve Bank of India (RBI), a long-standing critic of private cryptocurrencies, has said they pose immediate risks to customer protection, anti-money laundering and counter-terrorism financing.
The central bank’s financial stability report, released Tuesday, noted that private cryptocurrencies are “prone to fraud and extreme price volatility, given their highly speculative nature. Longer-term concerns relate to capital flow management, financial and macroeconomic stability, monetary policy transmission and currency substitution”.
The views expressed in the report are important in the context of the ongoing debates about whether India should ban private cryptocurrencies or not.
The RBI has again and again pointed to the deeper macroeconomic concerns of India’s unregulated private cryptocurrency market. However, the central bank is open to the idea of introducing a Central Bank Digital Currency (CBDC).
The government is in the process of drafting a national law to regulate the cryptocurrency market.
Also, the proliferation of private cryptocurrencies around the world has made regulators and governments sensitive to the associated risks, the report said.
“New illicit funding typologies continue to emerge, including the increasing use of virtual-to-virtual tiering schemes that attempt to obfuscate transactions in a relatively easy, cheap and anonymous way,” it noted.