The RBI Deputy Governor, T Rabi Shankar, has warned against investing in Cryptocurrency. Shankar addressed the audience during the IBA Banking Technology Conference and Awards on Feb 14th.
Moreover, the Deputy Governor said that banning Cryptocurrency is the most sensible option for India. Furthermore, T Rabi Shankar opines that a complete ban on Cryptocurrency is necessary.
He adds that there are strong reasons to keep the digital asset away from the formal financial system in India. This speech follows the Indian Government’s decision to tax cryptocurrency-related gains.
Cryptocurrency Threatens Financial Sovereignty, says RBI Deputy Governor
T Rabi Shankar highlighted many issues that financial regulators face when dealing with crypto. He said that Cryptocurrency is made to escape the regulated financial system. Moreover, they are similar or even worse than Ponzi schemes.
Shankar says, “They threaten the financial sovereignty of a country and make it susceptible to strategic manipulation by private corporates creating these currencies or Governments that control them.”
While addressing the event, Shankar opined that Cryptocurrency is not currencies, assets, or commodities. He said that financial sector regulators could not regulate Cryptocurrency. Furthermore, he adds that crypto is not a financial asset, real asset, or digital asset.
RBI Issues Cautions Against Cryptocurrencies
The RBI Deputy Governor is not alone in his views on crypto. Last week, the RBI Governor, Shaktikanta Das, issued a warning against crypto. The Governor said that dealing with Cryptocurrency could spell trouble for investors.
Das said that cryptocurrencies do not even have the underlying value of a tulip (speculative bubble in 17th century Netherlands). Furthermore, the RBI has stated that they have heard people’s opinions advocating for crypto regulation.
However, the Central bank says that none of these opinions holds weight. This message from the RBI follows the Union Budget 2022 presented earlier this month. The Indian Government has decided to impose a tax of 30% on crypto investments.
Moreover, the RBI is also looking to launch the digital version of the rupee through its Central Bank Digital Currency. CBDC will be a virtual currency, but they will be given legal tender status, unlike cryptocurrencies.