India’s central bank, the Reserve Bank of India (RBI), has been issuing warnings about investing in the crypto market- a pattern that accelerated especially after people lost large sums of money in the Terra (LUNA) crash.
Recently, the RBI Governor- Shaktikanta Das- once again alerted the investors by informing the public about the risks of the crypto space, potential crashes, and the possibility of losing their hard-earned money. He also mentioned that the central bank believes that its warnings have helped many people to withdraw from the markets in time.
RBI Governor’s Stance on Cryptocurrency
In an interview with ET Now earlier this week, the Governor of the Reserve Bank of India (RBI), Shaktikanta Das, cautioned the public against investing in cryptocurrency.
He claimed that the RBI has issued several warnings previously as well, regarding the risk factor associated with crypto investing. Das said: “I’m happy that we sounded those warning signals and I would like to believe that a large number of people would have taken a note of the warning signals and the concerns expressed by the Reserve Bank.”
“I would like to believe that many people did not invest in crypto or sort of pulled out of crypto thanks to the cautions and concerns that emanated out of the Reserve Bank.”
“Crypto, you know, we have said it earlier, it can create a lot of financial instability in terms of the ability of the central bank to determine monetary policy. It will also have an adverse impact on our exchange rate, on capital flows, on banking sector stability.”
Adding to this, Das also pointed out, “Cryptocurrency has the potential for being used as a tool for money laundering and for illicit transfer of money.” The Governor also reiterated his previous statement: “In fact, I said at one point that it doesn’t have any underlying, not even a tulip.”
“Something which doesn’t have an underlying, the prices will not remain high all the time so therefore it may crash, and it has crashed, ultimately it is the small investors who lose money so therefore it is a big risk for the small investors.”
Previously in July, Das had labeled cryptocurrencies as “dangerous”. Again in May, he had drawn the public attention to the market sell-off that was afoot and advised people to use their money wisely.
“We have been cautioning against crypto and look at what has happened to the crypto market now.”
India has imposed a 30 percent tax on crypto investors, and a 1 percent TDS on every crypto intra-traders. As of now, India has not regulated cryptos but crypto won’t be legalized as well.
According to Economic Affairs Secretary Ajay Seth, the nation is “fairly ready” with its consultation paper on cryptocurrencies and has consulted domestic as well as institutional stakeholders including the World Bank and the International Monetary Fund.
Recently, even the finance minister had asked crypto investors to stay alert as the central agency had been investigating a number of crypto exchanges in money laundering probes.
RBI’S Urges for a Crypto Ban
The RBI had recommended the Indian government impose a ban on cryptocurrency, including Bitcoin and Ether. However, Indian Finance Minister Nirmala Sitharaman had pushed back on this by saying that banning and regulation can only be effective with significant international collaboration.
“In view of the concerns expressed by RBI on the destabilizing effect of cryptocurrencies on the monetary and fiscal stability of a country, RBI has recommended for framing of legislation on this sector.”
“RBI is of the view that cryptocurrencies should be prohibited.”
“Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.”
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