Indian Central Bank RBI Warns Retail Investors of Crypto's Lack of Accountability and Stability
The Reserve Bank of India (RBI)’s May 2024 bulletin warns retail investors that “the crypto ecosystem lacks accountability and stability and is marked by regulatory ambiguity.” The Indian central bank also cautioned that some cryptocurrency systems may be “prone to crisis without safeguards.”
RBI Bulletin’s Crypto and Defi Warnings
India’s central bank, the Reserve Bank of India (RBI), released its monthly bulletin for May 2024 on Tuesday. It covers the significant impact and inherent risks of decentralized finance (defi) and cryptocurrencies within the financial system.
“Our findings suggest that the interest in cryptocurrencies is driven by speculative motive rather than a means of payment for real economic transactions,” the bulletin reads. “As the crypto ecosystem lacks accountability and stability and is marked by regulatory ambiguity, retail investors need to be more cautious.” The bulletin adds:
Some cryptos may be backed by underlying; however, if the underlying itself is another unstable digital asset with no transparency and central bank back up, the crypto system is prone to crisis without safeguards.
The bulletin includes a statement from RBI Governor Shaktikanta Das, who describes the terms “cryptocurrency” and “private cryptocurrency” as “a fashionable way of describing what is otherwise 100 percent speculative activity.”
India currently lacks a specific regulatory framework for cryptocurrencies. In 2021, a draft bill aimed at regulating digital assets was proposed by a governmental panel, but it remains pending. The Securities and Exchange Board of India (SEBI) recently submitted its regulatory proposals for crypto assets to a governmental advisory committee, suggesting that different regulators manage specific aspects of cryptocurrency trading. Concurrently, the Reserve Bank of India articulated its reservations, outlining the macroeconomic risks linked to cryptocurrencies, particularly concerning tax evasion and fiscal stability.
The Financial Intelligence Unit of India (FIU-IND) oversees 47 crypto entities and has officially recognized Binance and Kucoin as virtual asset service providers. Moreover, India’s finance minister anticipates the formation of a comprehensive cryptocurrency regulatory framework to emerge from G20 deliberations.
What do you think about the warnings by India’s central bank, the Reserve Bank of India (RBI) about crypto risks? Let us know in the comments section below. #Write2Earn