Key points to remember
- Reserve Bank of India Deputy Governor Shri T. Rabi Sankar called for a crypto ban during a speech today.
- He argued that cryptocurrency poses various threats and objections to a ban are largely unfounded.
- While RBI is hostile to cryptocurrency, the Indian government seems to have little interest in banning crypto.
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Shri T. Rabi Sankar, Deputy Governor of the Reserve Bank of India (RBI), called for a cryptocurrency ban during a speech on February 14.
Deputy Governor calls for crypto ban
The Deputy Governor of the Reserve Bank of India has joined the list of central bank officials openly hostile to cryptocurrencies.
In his speech, Rabi Sankar called cryptocurrency an “ideology” in addition to a technology. He added that cryptocurrency “is underpinned by a philosophy of escaping government controls [and has] specifically was developed to circumvent the regulated financial system.
He also said that cryptocurrencies cannot reasonably be defined as a currency, have no underlying cash flows, undermine KYC/AML regulations and pose a threat to India’s banking and monetary system as well as to its financial sovereignty.
Rabi Sankar further suggested that cryptocurrencies have no intrinsic value and are akin to Ponzi schemes, reiterating comparisons to tulip mania made by the RBI Chief Governor on February 10.
“All of these factors lead to the conclusion that banning cryptocurrency is perhaps the wisest choice available to India,” Rabi Sankar concluded at the end of his speech.
Anti-ban arguments were considered
Rabi Sankar also considered various arguments against a ban. First, he drew attention to the argument that advanced economies generally do not impose crypto bans. In turn, he argued that India was not an advanced economy and warned that companies that privately issue cryptocurrencies could control India’s economic policy.
He also objected to the idea that a cryptocurrency ban could lead to loss of wealth for private investors. Rabi Sankar claimed that it was not clear how many private crypto investors exist, said crypto investors are aware of the risks and said an exit can be provided so that these investors do not lose money. ‘silver.
Rabi Sankar also noted that some have suggested that a crypto ban should not be imposed due to the difficulty of enforcing such rules.
He argued that such difficulties “reinforce the need for a ban, rather than invalidate it”. However, he admitted that regulating cryptocurrencies might be “useless” due to the fact that most cryptocurrencies are, by definition, outside of government control.
The Indian government has little interest in a ban
The Reserve Bank of India has already taken a tough stance on cryptocurrency. Reports from December 2021 suggest that the bank favored a complete cryptocurrency ban during a board meeting.
Imposing a ban would likely require cooperation with the Indian government, which seems to have little interest in banning cryptocurrency. Although reports from November suggested an imminent crypto ban, a former finance minister who drafted the bill suggested that a blanket ban is unlikely.
India has had regulatory disputes around crypto in the past. The country banned banks from handing over crypto from 2018, but reversed the ban in March 2020. The Reserve Bank of India reaffirmed that banks can do business with crypto in mid-2021.
Disclosure: At the time of writing this article, the author of this article owned BTC, ETH, and other cryptocurrencies.
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