The Reserve Bank of India once again passed negative comments on Cryptocurrencies and claimed that cryptocurrencies are non-financial assets and also these are not currencies.
The Reserve Bank of India (RBI) is a central Bank of India, which keeps regulations on all the operating banks in India. RBI is aware of blockchain technology and also it is working on Central Bank Digital Currency (CBDCs) to issue two types of CBDCs in India. However RBI is in favour of blockchain adoption but its stance toward crypto is very strict. RBI always remains against the crypto industry. A few years ago, the RBI imposed a crypto banking ban on all the banks but later a petition and court orders revoked the banking ban decision of the RBI.
On 30 June, the Financial Stability Report of RBI stated that digital assets could not be categorized as currencies or any kind of financial assets and also emphasized that they have no intrinsic value.
“Cryptocurrencies are not currencies as they do not have an issuer, they are not an instrument of debt or a financial asset and they do not have any intrinsic value.”
RBI also warned that the adoption of Cryptocurrencies will continuously increase and such increasing crypto assets adoption might result in loss of money control because the majority of the crypto assets are in dollars. So dollarisation of the majority of the crypto assets is also one of the big issues associated with cryptocurrencies, as per RBI.
According to RBI, the risk associated with Cryptocurrencies will increase with their adoption.
In particular, the Central Bank emphasized the high volatility concerns and financial instability because of virtual currencies. Bank claimed that Crypto-assets resulted in huge financial instability in the past & also in the present.
“Historically, private currencies have resulted in instability over time and in the current context, result in ‘dollarisation’, as they create a parallel currency system(s).”
The Central Bank also pointed out that consideration of the Crypto market correlation with the equity market and noted that it might pose a big risk, So the Country needed sudden action against these issues & also needed to introduce a suitable regulatory framework to ensure the safety of investors.