The monetary authority on Wednesday again reiterated its strong views against cryptocurrencies saying they pose serious threats to the macroeconomic and financial stability of the country and also doubted the number of investors trading on them as well their claimed market value. Governor Shaktikanta Das reiterated his views against allowing cryptocurrencies saying they are serious threat to any financial system since they are unregulated by central banks.
His comments come ahead of the RBI’s internal panel report on the contentious topic which is expected next month. Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint. The government is actively looking at the issue and will decide on it. But as the central banker, we have serious concerns about it and we have flagged it many times,” Das told an event.
Questioning the big numbers being reported in the media on the number of investors trading on them as well the market value of these currencies, Das said, “I am not sure about the veracity of these numbers. Of course my view may not be fully right as we don’t get full information about these currencies as they aren’t regulated by us or by any other central bank. But I still think the number of investors look clearly exaggerated as bulk of them, say over 70 per cent, have invested only about Rs 1,000 each in cryptocurrencies”.
The Supreme Court in early March 2020 had nullified the RBI circular banning cryptocurrencies. Following this in February 5, 2021, the central bank had instituted an internal panel to suggest a model of central bank’s digital currency. The RBI had announced its intent to come out with an official digital currency, in the face of proliferation of cryptocurrencies like Bitcoin about which the central bank has had many concerns. The government last week moved to ban private cryptocurrencies.
“With regard to digital currency, I think we have already released our document. Our digital payment document spells out that digital currency is work in progress in RBI,” Das told reporters announcing the February 5, 2021 monetary policy. “We had a committee that is still on the drawing board. In fact, an internal committee is taking a closer look to decide on the model of the central bank digital currency and you will hear from the Reserve Bank very soon in the matter,” he added.
Private digital currencies/virtual currencies/crypto currencies have gained popularity in the past one decade or so. Here our regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks. It can be noted that on March 4, 2021, the Supreme Court had set aside an April 6, 2018, RBI circular prohibiting banks and entities regulated by it from providing services in relation to virtual currencies.
Till date, the RBI has not come out with a stand that any of the entities regulated by it, namely, nationalised banks/scheduled commercial banks/cooperative banks/NBFCs, have suffered any loss or adverse effect directly or indirectly, on account of virtual currency exchanges, an apex court bench comprising justices Rohinton Nariman, Aniruddha Bose and V Ramasubramanian had said in a 180-page judgement.
Justice Ramasubramanian, who authored the ruling, found the RBI circular disproportionate with an otherwise consistent stand taken by the central bank that such currencies were not prohibited in the country. Besides, the court also found that RBI did not consider the availability of alternatives before issuing the circular. The court noted that the April circular was issued despite the fact that the central bank could not quote a single instance when VC exchanges actually impacted entities regulated by RBI.
On November 2, 2017, the Centre constituted an inter-ministerial committee, which initially recommended the Crypto-token Regulation Bill of 2018′ which mooted a complete ban on VCs.