The Reserve Bank of India (RBI) has warned that cryptocurrency poses multiple risks to the country’s financial stability. The apex bank stated that cryptocurrencies are prone to frauds and extreme price volatility, stressing that “cryptocurrencies pose immediate threats to customer protection and anti-money laundering (AML)/countering terrorism financing (CFT).”
Reserve Financial Institution of India, the country’s central financial institution, released its biannual Monetary Stability Report (FSR) last week. A section of the 144-page document examines “non-public cryptocurrency dangers.” The time period “non-public” refers to all cryptocurrencies that aren’t issued by the RBI, such as bitcoin and ether.
The central financial institution wrote: Regulations and governments have been alerted to the dangers of personal cryptocurrencies due to their proliferation throughout the globe.
The RBI has warned that non-public cryptocurrencies pose a danger to consumer safety and anti-money laundering (AML) / countering the financing of terrorism (CFT).
The central bank additionally noted: “In addition to fraud, they are additionally prone to excessive value volatility, given their highly speculative nature”. Capital circulation, monetary and macroeconomic stability, financial coverage transmission, and forex substitution comprise longer-term considerations.
The report also referenced the findings of the Monetary Motion Activity Pressure (FATF). “The digital asset ecosystem has seen the rise of anonymity-enhanced cryptocurrencies (AECs), Decentralized exchanges, mixers, tumblers, privateness wallets, and other products and services that permit or enable diminished transparency and enhanced obfuscation of monetary flows.”
The RBI emphasized: Illicit financing continues to evolve, as does the use of virtual-to-virtual schemes that attempt to further muddy transactions in a relatively simple, low-cost, and nameless manner.
The RBI noted that the market capitalization of the top 100 cryptocurrencies is now $2.8 trillion, and warned that “in the EMEs that may be subject to capital controls, free access to crypto assets by residents could undermine the framework for capital regulation”.
The Central Bank of India also addressed decentralized finance (Defi), which has “recently been flagged by the Bank for International Settlements (BIS) as having the risk of concentration of power,” the Indian central bank noted,
It added, “Fast progress in decentralized finance (Defi) is mainly geared towards a hypothesis, investing, and arbitraging in crypto property, rather than towards the development of the actual financial system”.
Additionally, the RBI stressed that the limitation of AML and know-your-customer (KYC) provisions, “along with transaction anonymity, exposes DFI to unlawful actions and market manipulation, as well as posing monetary stability concerns.”
It has repeatedly stated that it has fundamental and critical concerns about cryptocurrencies. The RBI called on the government to completely ban cryptocurrency at the central board of administrators meeting, stating that a partial ban would not work.
The Indian authorities have delayed a cryptocurrency invoice. During the winter session of parliament, a bill was supposed to be discussed, but it was not. The federal government appears to be reworking the bill at the moment.
