The Reserve Bank of India (RBI) published its annual report for the years 2017-18 on their website.
A long report covers several warnings and predictions regarding cryptocurrencies.
India keeps cryptocurrencies tightly controlled and under a ban since crypto is considered as a high-risk asset which can be used for criminal activities, fraudulent Ponzi schemes and cause potential damage to the investors. RBI wants to provide stability and protect investors, thus banning cryptocurrencies in the reality where the proper regulatory framework is amiss.
The report indicates a growing volume of global crypto usage and potential effects such as peer-to-peer trading becoming widely used, which may involve an increased turnover of cash. RBI warns that this has to be closely inspected.
Moreover, there is a potential situation where RBI might lose its control over crypto. The reason is the migration of crypto exchanges abroad where they can operate without being taxed, controlled and watched by RBI.
The dilemma is clear. India wants to protect investors and keep crypto crimes as low as possible while having concerns that bans and lack of regulation might push crypto trading further into darkness. Not being able to control, tax, and participate in the growing crypto economy can be the result of aggressive banning.
Cryptocurrency: Evolving Challenges is a notable part of the report. This part states that “the cryptocurrency eco-system may affect the existing payment and settlement system which could, in turn, influence the transmission of monetary policy. Furthermore, being stored in digital/electronic media – electronic wallets – it is prone to hacking and operational risk, a few instances of which have already been observed globally”.
RBI also mentions that they requested the consultation from an inter-departmental group to study and provide guidance on the desirability and feasibility of introducing a central bank digital currency.
RBI gave its warnings and concerns, while all Indian banks stopped crypto related operations since June. All eyes are now on the Supreme Court, that will decide regarding the crypto ban on September 11.
WHY IS IT IMPORTANT?
- India has a big potential to become a crypto hub of the world, if regulations are placed and the crypto ban is lifted.
- RBI can foresee that crypto exchanges might give up in India and move abroad from where they can cause more harm than RBI tries to prevent by banning.