India’s central bank, the Reserve Bank of India (RBI), has warned of the multiple risks the cryptocurrency poses to the country’s financial stability. “They are also prone to fraud and extreme price volatility,” says the apex bank, noting that “cryptocurrencies present immediate risks to customer protection and the fight against money laundering (AML) / fight against the financing of terrorism (CFT) â.
RBI cryptocurrency rating
India’s central bank, the Reserve Bank of India (RBI), released its semi-annual Financial Stability Report (FSR) last week. The 144-page document includes a section on âPrivate Cryptocurrency Risksâ. The term “private” refers to all cryptocurrencies that are not issued by the RBI, including bitcoin and ether.
The central bank wrote:
The proliferation of private cryptocurrencies across the world has raised awareness among regulators and governments of the associated risks.
âPrivate cryptocurrencies present immediate risks for customer protection and the fight against money laundering (AML) / countering the financing of terrorism (CFT),â the RBI pointed out.
Further, the central bank noted, âThey are also prone to fraud and extreme 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 report also refers to the findings of the Financial Action Task Force (FATF) which states that âthe virtual asset ecosystem has seen the rise of enhanced anonymity cryptocurrencies (AECs), mixers and tumblers, decentralized platforms and exchanges, privacy portfolios and other types of products and services that allow or allow reduced transparency and increased obfuscation of financial flows. The RBI pointed out:
New typologies of illicit financing continue to emerge, including the increasing use of virtual-to-virtual overlay schemes that attempt to further scramble transactions in relatively simple, cheap and anonymous ways.
Noting that the market capitalization of the top 100 cryptocurrencies has reached $ 2.8 trillion, the RBI warned that “in EMEs [emerging market economies] which are subject to capital controls, the open availability of crypto assets to residents can undermine their capital regulatory framework. “
The report also deals with decentralized finance (challenge), which “has recently been flagged by the Bank for International Settlements (BIS) as presenting a danger of concentration of power,” India’s central bank noted, adding:
The rapid growth of decentralized finance (challenge) is mainly geared towards speculation, investment and arbitrage in crypto assets, rather than the real economy.
The RBI added that the limitation of the AML and Know Your Customer (KYC) provisions, “as well as the anonymity of transactions, exposes the challenge to illegal activities and market manipulation and poses problems. financial stability “.
India’s central bank has repeatedly stated that it has major and serious concerns about the cryptocurrency. At its recent central board meeting, the RBI called on the government to ban cryptocurrency altogether, saying a partial ban would not work.
Meanwhile, the Indian government has delayed the introduction of a cryptocurrency bill. A bill was listed for consideration in the winter session of Parliament, but it was not passed. The government is reportedly reworking the bill.
What do you think of the Indian central bank’s warning regarding cryptocurrency? Let us know in the comments section below.
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