Private Cryptocurrencies Pose Risks To Customer Protection: RBI Report
The Reserve Bank of India (RBI), a longtime critic of private cryptocurrencies, has said that these pose immediate risks to customer security, anti-money laundering and countering the financing of terrorism.
The central bank’s Financial Stability Report, released on Tuesday, said private cryptocurrencies are “prone to fraud and extreme price volatility, given their highly speculative nature. Long-term concerns are capital flow management, financial and macro-economic stability.” related to monetary policy transmission and currency substitution”.
The views expressed in the report assume significance in the context of the ongoing debate on whether India should ban private cryptocurrencies.
The Reserve Bank of India has, from time to time, highlighted the profound macroeconomic concerns posed by the unregulated private cryptocurrency market in India. However, the central bank is open to the idea of introducing a Central Bank Digital Currency (CBDC).
The government is in the process of formulating a national law to regulate the cryptocurrency market.
In addition, the proliferation of private cryptocurrencies around the world has left regulators and governments vulnerable to the associated risks, the report said.
“New illicit financing typologies are emerging, including the increased use of virtual-to-virtual layering schemes that attempt to advance dirty transactions in a comparatively easy, cheap and anonymous way.”