The Indian government launched plans to ban private cryptocurrencies in November 2021 and now its reserve bank has criticized the asset class.
Shri Rabi Sankar, Deputy Governor of the Reserve Bank of India (RBI), said in a speech on February 14, 2022that “crypto-technology is underpinned by a philosophy of escaping government controls”.
He added: “Cryptocurrencies were specifically developed to circumvent the regulated financial system. These should be reason enough to treat them with caution.
“We have also seen that cryptocurrencies do not lend themselves to being defined as money, asset or commodity; they have no underlying cash flows, they have no intrinsic value; that they resemble Ponzi schemes and may even be worse.
“That should be reason enough to keep them away from the formal financial system. Moreover, they undermine financial integrity, especially the KYC regime and AML/CFT regulations and at least potentially facilitate anti-social activities.
“Destroyed monetary system”
But the November parliamentary bill, which aims to ban private cryptocurrencies, also aimed to “create a facilitating framework for the creation of the official digital currency”.
Sankar added, “More substantially, they can, and if allowed, most likely will destroy the monetary system, the monetary authority, the banking system, and in general the government’s ability to control the economy.
“They threaten a country’s financial sovereignty and make it vulnerable to strategic manipulation by private companies creating these currencies or governments that control them.
“All of these factors lead to the conclusion that banning cryptocurrency is perhaps the most sensible choice open to India.
“We have reviewed the arguments made by those advocating that cryptocurrencies should be regulated and found that none of them stand up to basic scrutiny.”