India’s central bank, the Reserve Bank of India (RBI), has warned of many risks that cryptocurrencies pose to the country’s financial stability. “They are also prone to fraud and high price volatility“, Asserted the bank, stressing that”cryptocurrencies represent imminent risks for consumer protection and the fight against money laundering (AML) and the financing of terrorism (CFT)“.
The RBI Valuation of Cryptocurrencies
The Reserve Bank of India (RBI), released its semi-annual Financial Stability Report (FSR) last week. This 144-page document includes a chapter assessing the “risks related to private cryptocurrencies“. The term “private” refers to all cryptocurrencies that are not issued by the RBI, including bitcoin (BTC) and ether (ETH).
The central bank writes:
“The proliferation of private cryptocurrencies around the world has drawn the attention of regulators and governments to the associated risks.
Private cryptocurrencies pose imminent risks for client protection and the fight against money laundering (AML) and the financing of terrorism (CFT).“
In addition, the Central Bank noted: “They are also prone to fraud and high price volatility, given their highly speculative nature. Longer-term concerns relate to the management of capital flows, financial and macroeconomic stability, transmission of monetary policy and currency substitution.“
The conclusions of the Financial Action Task Force (FATF)
The report also refers to the findings of the Financial Action Task Force (FATF) that “the virtual asset ecosystem has seen the rise of cryptocurrency with enhanced anonymity (AEC), mixers and tumblers, decentralized platforms and exchanges, privacy wallets and other products and services that reduce transparency and obscure financial flows.“
The RBI pointed out:
“New typologies of illicit financing continue to emerge, including the increasing use of virtual currency overlay schemes that attempt to further muddle transactions in a relatively simple, cheap and anonymous manner.“
Noting that the market capitalization of the top 100 cryptocurrencies has reached $ 2.8 trillion, the RBI warned that “in EMEs [économies de marché émergentes] which are subject to capital controls, the free accessibility of cryptocurrencies to residents could compromise their capital regulatory system“.
The report also discusses decentralized finance (DeFi), which “was recently flagged by the Bank for International Settlements (BIS) as carrying a risk of concentration of powerThe Indian Central Bank pointed out, adding:
“The rapid growth of decentralized finance (DeFi) primarily favors speculation, investment, and arbitrage in crypto assets rather than the real economy.“
Indian government delays introduction of cryptocurrency bill
The RBI added that the restriction of the anti-money laundering and know-your-customer (KYC) provisions, “as well as the anonymity of transactions, expose DeFi to illegal activity and market manipulation and raise concerns about financial stability“.
India’s Central Bank has repeatedly stated that it has serious concerns about cryptocurrencies. At its recent meeting of its central board of directors, the RBI called on the government to ban completely cryptocurrency, saying a partial ban wouldn’t work.
Meanwhile, the Indian government is delaying the introduction of a cryptocurrency bill. This was due to be considered during the winter session of Parliament, but it has still not been adopted. The government is reportedly in the process of rework it.
Source: Bitcoin.com
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Jean-Louis Lefevre
I am convinced that cryptocurrencies are opening up extraordinary new perspectives for us that I do not want to miss under any circumstances! I try to continuously enrich my skills in this area and share with you everything I learn with my followers and my hours spent exploring this universe.
