published a report titled ‘Report on Trend and Progress of Banking in India 2017-18’. The report states the current stance of the central bank over cryptocurrencies, that they are not a threat. The report reads:
“The Financial Stability Board (FSB) has undertaken a review of the financial stability risks posed by the rapid growth of crypto-assets. Its initial assessment is that crypto-assets do not pose risks to global financial stability currently. The market continues to evolve rapidly, however, and this initial assessment could change if crypto-assets were to become more widely used or interconnected with the core of the regulated financial system.”
The report further states that while the crypto assets are not dangerous in themselves, they will require a system of regulations:
” Crypto-currencies need constant monitoring on overall financial stability considerations, given the rapid expansion in their usage.”
Cryptocurrency and India
Last April, RBI exercised a ban on all Indian banks and financial institutions to stop functioning as intermediaries between Indian cryptocurrency exchanges and traders. BP Kanungo, the Deputy Governor of RBI said at the time
“Regarding Ring-Fencing regulated entities from virtual currencies, digital tokens issued by private parties are getting international attention for quite some time, for their speculative value. Internationally, the regulatory response to these tokens are not uniform. It is universally failed that it is seriously undermine the airmail and FATF framework, adversely impact market integrity and capital controls. If they grow beyond a critical size they can financial stability as well. In the past RBI had cautioned on three occasions the members of public regarding the various risks they are undertaking by exposing themselves to cryptocurrency.”
Following the announcement, several Indian cryptocurrency exchanges and traders filed an objection against the bank in Supreme Court of India. After being rescheduled and adjourned a few times, another hearing is scheduled on 15th of January 2019.
During a hearing on 25th of October, the apex court asked RBI to submit an affidavit to clarify details for when it will enact regulations for cryptocurrencies. However, the affidavit wasn’t submitted within that deadline of two weeks and when it was filed it has no details about the timeline within which regulation for cryptocurrencies will be enacted. The affidavit only has the government taking at lengths about the minutes of meetings in which crypto regulation was discussed.
Ministry of Finance (MoF) has finally submitted the Counter-Affidavit in the Supreme Court (SC).
MoF has apprised SC only about details of internal meetings but not the "..estimated time within which the Government will
ultimately come out with its policy decision..". https://t.co/caNBDOg4Un
— Crypto Kanoon (@cryptokanoon) December 3, 2018
The Current Stance
Interestingly, within the past few weeks, RBI has shown a positive attitude towards cryptocurrency. A document circulating on social media, that details five questions regarding cryptocurrencies asked by Lok Sabha, the lower house of India’s bicameral parliament. The document also has their answers by Shri Pon Radhakrishnan, Minister of State in the Ministry of Finance.
The minister went on to reveal in the document that the committee “is examining all issues, including the pros and cons of the introduction of an official digital currency in India.”