New Delhi: The Reserve Bank of India (RBI) in its Financial Stability Report (FSR) has said that private cryptocurrencies pose immediate risks to customer protection and anti-money laundering, and combatting the financing of terrorism as digital currencies are extremely volatile given their highly speculative nature.
According to the report, “They are also prone to frauds and to extreme price volatility, given their highly speculative nature. Longer-term concerns relate to capital flow management, financial and macro-economic stability, monetary policy transmission and currency substitution.”
The RBI observations assume significance in the context of the ongoing debates on whether India should ban private cryptocurrencies or not.
The central bank, time and again, has highlighted the deeper macroeconomic concerns posed by the unregulated private cryptocurrency market in India. However, the RBI is open to the idea of introducing a Central Bank Digital Currency (CBDC).
The central government is in the process of framing a national law to regulate the private cryptocurrency market.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, was included in the Lok Sabha Bulletin-Part II for introduction in the Winter Session of Parliament that concluded on December 22.
According to the bulletin, the Bill, which could not be introduced, sought to create a facilitative guidelines for the creation of the official digital currency to be issued by the RBI.
It also sought to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.
The total market capitalisation of the top 100 cryptocurrencies has reached $2.8 trillion.