Deputy Governor of the RBI: banning cryptocurrencies is ‘the most advisable choice’
Rabi Sankar has taken a strong stance against cryptocurrencies, arguing that their legalization could have a destabilizing effect on the country’s fiat currency
Rabi Sankar of the Reserve Bank of India compared cryptocurrencies to Ponzi schemes. In his opinion, banning them, not regulating them, would be the “most advisable choice” for the Indian government.
On February 14, Sankar, the deputy governor of the RBI, said:
“We have acknowledged that cryptocurrencies are not subject to the definition of currency, asset or commodity.
Cryptocurrencies are not currencies, financial assets, real assets, and not even digital assets. Therefore, they cannot be regulated. It is not possible to regulate something that cannot be defined. ”
Sankar believes that regulating cryptocurrencies would mean justifying their use as a store of value and in some cases giving them the role of currency, encouraging their use within the framework established by the government. However, he acknowledges that banning them could incentivize some people to use them for illegal activities: “drug trafficking is rampant, although obviously prohibited.”
The deputy governor also stressed that allowing cryptocurrencies to exist in an ecosystem dominated by fiat currencies “is bound to have a destabilizing effect on a country’s monetary and fiscal stability.” If cryptocurrencies were regulated so that they could be used as an investment asset, its usefulness as a store of value would increase and could push many users to move away from the rupee.
Sankar attacked the true value of cryptocurrencies saying:
“Unlike the value of the rupee, which is anchored in monetary policy and its status as fiat currency, the value of cryptocurrencies is based solely on the expectation that others will also consider them a valuable asset and use them”.
India is one of the many countries where crypto companies have asked their government for greater regulatory clarity to guide their actions. Without such clarity, it is difficult for businesses to formulate long-term plans for their products and services that are sure not to break any laws.
Crypto companies in India have long demanded greater regulatory transparency: without such clarity, it is difficult for companies to formulate long-term plans for their products and services so as not to break any laws.
On 11 February, Finance Minister Nirmala Sitharaman announced that he would not immediately decide whether to legalize or ban cryptocurrencies, leaving India in a prolonged state of regulatory limbo.
The Indian government is testing its capabilities in distributing a central bank digital currency (CBDC). Sitharaman revealed on February 1 that he expects to launch a digital rupee program by 2023 to stimulate economic growth.