The Reserve bank of India (RBI) aversion and doubts on cryptocurrencies continues, the regulator discloses the reasons for the same in an annual report released on Aug. 29. Notably, while RBI steps back to accept any form of crypto, it still wants to step ahead to understand and take up blockchain technology.
RBI discloses in its annual report, that the regulators feel the need to keep track of trade in virtual currencies turning opaque. The report states:
“Developments on this front need to be monitored as some trading may shift from exchanges to peer-to-peer mode, which may also involve increased usage of cash. Possibilities of migration of crypto exchange houses to dark pools/cash and to offshore locations, thus raising concerns on AML/CFT (anti-money laundering/combating the financing of terrorism) and taxation issues, require close watch.”
On April 06, RBI directed the nation’s bank to not to support or engage in any cryptocurrency trade and exchanges. It further allotted them three months time to wind down all business relationships pertaining to the digital assets. Indian crypto enthusiasts while disheartened, migrated to peer-to-peer trade and crypto-to-crypto business model to circumvent the ban. The former involves the exchanges connecting the buyer and seller, while in crypto-to-crypto transactions, traders can buy units of one digital currency for another at predetermined rates.
Some of the local exchanges have plans to shift their offices to more crypto-friendly countries. However, they feel that RBI could have been more complacent towards crypto and instead of coming down heavily on it, they should have taken prudent steps to understand the ecosystem and regulate it. Praveen Kumar, chairman, and CEO of Belfrics, a Malaysia-based exchange with operations in India states:
“The exchanges have been following a robust know-your-customer procedure and enforcing only bank-related transfers which could have helped to keep a tab on the money trail,”
RBI explains that among one of the reasons for their aversion among many is to protect customers. The report mentions:
“Though cryptocurrency may not currently pose systemic risks, its increasing popularity leading to price bubbles raises serious concerns for consumer and investor protection, and market integrity,”
RBI put forward the reference of the $200 billion worth of Bitcoin scam that occurred in December 2017. The regulator noted again how cryptocurrencies have no intrinsic value as they are not backed by assets. Currently, all crypto enthusiasts are waiting with baited breath for the final supreme court hearing on Sept. 11 on the RBI ban. Meanwhile, it is rumored that RBI has set up a special unit to understand the nature of digital assets better.