NEW DELHI: RBI is sticking to its stand over cryptocurrencies and has conveyed to the government its decision to seek a ban on such instruments, having already expressed its serious concerns.
While asserting that the technology of blockchain should be encouraged, the central bank has questioned the purpose of cryptocurrencies to be labelled as a currency. It has said that a currency is a sovereign right and cannot be assigned to any individual entity. The issue of these instruments being legal is also yet to be settled.
The central bank has also raised security risks linked to cryptocurrencies, saying it could give rise to money laundering and terror financing, because of anonymity of the transactions. The regulator believes that the steps taken by the Modi government to restrict black money flow would be undone if it allowed cryptocurrency in the economy as a lot of illicit cash stashed overseas may return via this route.
Last week, in an interview, RBI governor Shaktikanta Das had told TOI that the regulator had conveyed its concerns to the government.
“There are so many codes and so many transactions. It would be difficult to identify the source due to the complex nature of these instruments,” said an official referring to the RBI’s strong backing for a ban. It has also pointed out that reporting such transactions in keeping with global commitments would be difficult, given the tough task of identifying the beneficiaries and tracking the transactions.
The RBI has also pointed to the dangers to macroeconomic management if these instruments are allowed as they would pose “serious risks” to the financial system of the country, sources said.
In 2018, the central bank had issued a circular asking banks and other entities regulated by the RBI not to deal in virtual currencies (VCs) or “provide services for facilitating any person or entity in dealing with or settling VCs”. This circular was quashed by the Supreme Court in March last year on the ground of it being not proportionate.
In recent weeks, the RBI has also talked about bringing its own digital currency, which is different from cryptocurrencies. The Centre has set up an inter-ministerial panel, chaired by the economic affairs secretary, which has submitted its report and the government is expected to take a decision on the issue.
Source : Times of India