Thursday, The Reserve Bank of India, or RBI, the country’s central bank, published a bulletin critical of the cryptocurrency industry. While the report praised the innovative distributed ledger technology associated with digital currencies, the RBI dismissed arguments calling for regulation of such assets and called for an outright ban. The main concerns of the RBI were related to cryptocurrencies that threatened the financial sovereignty of the country. The RBI wrote:
“Private currencies have historically resulted in instability and thus have become fiat currencies over the centuries. The retrograde move to private currencies cannot be made simply because technology allows without considering dislocation that it causes in the legal, social and economic fabric of society”.
According to the RBI, an increase in the adoption of cryptocurrencies would lead to the danger of them replacing the Indian rupee, thus undermining the authorities’ control over monetary policy. What’s more, the RBI does not appear to be convinced by arguments citing the relative laissez-faire regulation of cryptocurrencies in developed countries, such as the United States, as a basis for India to do the same:
“Almost all cryptocurrencies are priced in dollar terms. If cryptocurrencies replace emerging market currencies, that will give developed markets better strategic control over emerging markets.”
However, there seems to be little concern as to how such a proposed ban would affect everyday Indian crypto enthusiasts. While the RBI suggested that individual investors would be provided with “reasonable outlets” so as not to lose money, it also said:
“People who have invested in these instruments are fully aware of the risks involved. Investors who have purchased these instruments have done so with their eyes wide open, at their own risk and do not warrant any regulatory waiver.”
India is currently facing a chaotic regulatory requirement regarding cryptocurrencies. While some entities, such as the RBI, are in favor of banning cryptocurrencies, others, such as the Indian government, want to regulate the sector rather than enact a blanket ban.
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