The Reserve Bank of India has once again taken a stance against cryptocurrency and its legalization.
Maintaining its point of view, the RBI stated that there is no upside to making cryptocurrencies a legal affair, and they also drew similarities between gambling instruments and cryptocurrencies.
These statements from the RBI’s senior officials are more one-sided than the government’s neutral and cautious approach.
Earlier, JP Morgan’s CEO Jamie Dimon also criticized cryptocurrencies, but more bluntly by calling them ‘worthless and fraudulent’ and citing them as a ‘criminal safe house’.
RBI’s Stance
The Reserve Bank of India is fearful about the widespread adoption of cryptocurrency because of its highly volatile nature and promise of a high return, which could make investors habitual in investing, just like gambling.
They also stated that cryptocurrencies in their current form provide only paltry benefits; that’s why they should not be included in the mainstream financial system.
Moreover, there are concerns about money laundering and, most importantly, terror financing, which is something that India has faced a lot.
Furthermore, the RBI also advised the current government that they should be cautious and should not ignore the ever-changing dynamics of the crypto world.
Government’s Stand
The government’s stand appears to be a cautious and pragmatic approach that tries to balance out the potential benefits and minimize losses.
At the recent G20 New Delhi summit, a framework was laid out that strongly discouraged blanket bans on cryptocurrency by participating countries, so naturally, the possible ban on it by the Indian government is out of order for now.
Currently, the government has implemented a 30% tax on profit from crypto and 1% TDS on all transactions. The numbers look high, but they are done to improve the traceability of the transactions.
CBDCs as an Alternative
The Reserve Bank of India has been pushing to adopt ‘Central Bank Digital Currencies (CBDC)’ as a much safer and more regulated alternative to cryptocurrencies.
Also known as the ‘Digital Rupee’ is a futuristic step from the RBI in the adoption of digital currencies.
Unlike random cryptocurrencies, CBDCs are heavily regulated and governed by the central bank itself, so there is an assurance of security, consumer protection, and regulatory compliance.
Conclusion
The decisions around cryptocurrency are ongoing, but on a slower side, by both the central bank and the government.
There could be stringent regulations coming for cryptos to curb their misuse.
Meanwhile, on the other hand, the average age of crypto investors has risen from 25 to 30, and the male-to-female ratio is 7:1.
Frequently Asked Questions
Q1: What is the Reserve Bank of India’s stance on cryptocurrencies?
Answer: The Reserve Bank of India has expressed concerns about cryptocurrencies due to their potential for illicit activities and financial risks. It has instructed banks to not deal with entities involved in cryptocurrencies to protect investors and maintain financial stability.
Q2: Are cryptocurrencies legal in India according to the Reserve Bank?
Answer: While the Reserve Bank of India has not outright banned cryptocurrencies, it has barred banks from facilitating transactions involving virtual currencies. Cryptocurrency exchanges and users face regulatory uncertainty and challenges in accessing banking services.
Q3: Why is the Reserve Bank of India worried about cryptocurrencies?
Answer: The Reserve Bank of India is concerned about cryptocurrencies due to their decentralized nature, potential for money laundering, consumer protection issues, and market volatility. It aims to safeguard the financial system and ensure the stability of India’s currency.
Q4: Can individuals in India still invest in cryptocurrencies?
Answer: Individuals in India can still invest in cryptocurrencies despite regulatory restrictions. However, they must rely on peer-to-peer transactions and face challenges in accessing banking services or transferring funds from their bank accounts to cryptocurrency exchanges.
Q5: Is the Reserve Bank of India considering a complete ban on cryptocurrencies?
Answer: The Reserve Bank of India has explored the idea of a central bank digital currency (CBDC) while maintaining its cautious stance on private cryptocurrencies. While a complete ban on cryptocurrencies has not been implemented, the RBI continues to monitor the evolving landscape and assess potential risks.
Greetings, I’m Akriti Gupta, a recent graduate from Delhi University. My pursuit in life revolves around an insatiable curiosity to explore and acquire new knowledge, fostering personal growth while nurturing a sense of compassion and goodness within me. Among my passions, painting, calligraphy, doodling, and singing stand as the cornerstones of my creative expression. These hobbies not only serve as outlets for my imagination but also as mediums through which I continually learn and evolve.
