T Rabi Sankar, Deputy Governor of the Reserve Bank of India (RBI), advocated for an absolute ban on cryptocurrency in the country on Monday. There are compelling reasons to keep cryptocurrencies out of the formal financial system, according to the RBI’s deputy governor.
“They jeopardize a country’s financial sovereignty and make it vulnerable to strategic manipulation by private corporations that create or control these currencies. All of these facts point to the conclusion that India’s best course of action is to ban bitcoin “Additionally, the RBI’s Deputy Governor stated.
Additionally, he stated that cryptocurrencies were established intentionally to circumvent the regulated financial system and are comparable to, if not worse than, Ponzi schemes. “Cryptocurrencies are not definable as a money, asset, or commodity; they lack underlying cash flows and intrinsic value; they are equivalent to Ponzi Schemes, if not worse,” Sankar remarked at an Indian Banks Association event. A Ponzi scheme is a type of scam in which investors are enticed and earnings are paid to previous investors using funds from new investors. It earns little or nothing legitimately.
‘Use caution while dealing with cryptocurrencies’
Sankar continued, “As previously stated, crypto-technology is based on a concept of evading government regulations. Cryptocurrencies were created primarily to circumvent the controlled financial system. These should be sufficient reasons to proceed with caution.”
“They jeopardize financial integrity, particularly the KYC and AML/CFT regimes, and may encourage anti-social behavior. More significantly, they have the potential (and almost certainly will) to destroy the currency system, the monetary authority, the banking system, and the government’s overall ability to oversee the economy” he stated. He said that the RBI had “studied the arguments advanced by those arguing for regulation of cryptocurrencies and determined that none of them pass the basic examination.”
In 2021, illegal cryptocurrency transactions will top $14 billion, Shankar added, citing a Wall Street Journal investigation. According to industry estimates, there are between 15 million to 20 million cryptocurrency investors in India, with total assets of approximately $400 billion. According to the RBI, the average holding remains tiny at only 1,566, implying that “asset loss, if it occurs, is expected to affect only a small fraction of these investors.”
Last week, RBI Governor Shaktikanta Das issued a stark warning against investing in cryptocurrencies, stating that they lacked the underlying value of even a tulip – a reference to a 17th-century speculative bubble in the Netherlands.