Banning crypto most advisable choice, says RBI Deputy Gov

Cryptocurrencies have no intrinsic value and could even be worse than Ponzi schemes, RBI deputy governor T Rabi Sankar said, advocating a ban even while India is undecided on regulating them.

“We have seen that crypto-technology is underpinned by a philosophy to evade government controls,” Sankar said at the 17th Annual Banking Technology Conference and Awards of the Indian Banks’ Association (IBA). “Cryptocurrencies have specifically been developed to bypass the regulated financial system. These should be reason enough to treat them with caution.”

According to Sankar, cryptocurrencies are not amenable to definition as a currency, asset or commodity and these should be reason enough to keep them away from the formal financial system. That apart, cryptos also undermine financial integrity, especially the KYC regime and Anti-Money Laundering and Combating of Financing of Terrorism regulations and at least potentially facilitate anti-social activities, he said.

That apart, he said that if allowed cryptos can wreck the currency system, the monetary authority, the banking system, and in general the government’s ability to control the economy.

“All these factors lead to the conclusion that banning cryptocurrency is perhaps the most advisable choice open to India. We have examined the arguments proffered by those advocating that cryptocurrencies should be regulated and found that none of them stand up to basic scrutiny,” said Sankar.

Central banks worldwide have warned against the risks of privately issued cryptocurrencies for reasons ranging from the volatility in their value to risks to financial stability while working on plans to launch their own digital currencies to promote financial inclusion.