Cryptocurrencies A Serious Concern, Says RBI Governor

New Delhi: Reserve Bank of India (RBI) Governor Shaktikanta Das has expressed “serious concern” over cryptocurrencies.

Reiterating the central bank’s stance on virtual currencies, Das highlighted the threat they could pose to India’s financial stability.

He doubted the extent of adoption of cryptocurrency being claimed by its promoters in the country.

“The sense I have, I’m not so sure about the number of investors which are being quoted,” Das said while speaking at a Business Standard summit.

The RBI has been critical of cryptocurrencies since 2013.

In 2018, RBI even issued a circular discouraging the use of virtual currencies and banning banks and other financial institutions from providing any related services. The Supreme Court overturned that directive in March 2020, leading to a massive spike in crypto trading volume.

Why is RBI worried?

One of RBI’s major concerns is the anonymity factor that cryptocurrencies facilitate. Records of transactions are available through a public ledger, but traders’ identities are concealed. It becomes very difficult for financial institutions to track the flow of money, and gives certain people the chance to engage in money-laundering or tax evasion.

Former RBI Governor Dr D Subbarao had expressed concern that increased crypto adoption may have ad adverse effect on the macroeconomy. “It is quite possible that domestic price formation could be set in that virtual currency,” he had said.

“Cryptocurrencies could become a conduit for capital flight, especially in a country like India where there is still no full convertibility of capital,” he added.

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