The Reserve Bank of India (RBI) in its Financial Stability Report (FSR) has stated that private cryptocurrencies pose immediate risks to customer protection, anti-money laundering, and preventing terrorism financing because digital currencies are extremely volatile due to 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’s remarks are significant in light of the ongoing debate in India over whether or not private cryptocurrencies should be banned.
The central bank has repeatedly stated that the unregulated private cryptocurrency market in India poses deeper macroeconomic concerns. The RBI, on the other hand, is open to the idea of 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 consideration during Parliament’s Winter Session, which ended on December 22.
According to the bulletin, the Bill, which was never introduced, aimed to create guidelines that would make it easier for the RBI to create an official digital currency.
It also aimed to make all private cryptocurrencies illegal in India. It does, however, allow for some exceptions in order to promote cryptocurrency’s underlying technology and applications.
The total market capitalisation of the top 100 cryptocurrencies has reached $2.8 trillion.