Private cryptocurrency poses immediate threats to customer protection, anti-money laundering and combating financing of terrorism (CFT), according to the Reserve Bank of India’s Financial Stability Report (FSR), which was noted December 29.
Due to their high speculative nature, they are also susceptible to frauds and extreme price volatility. The report stated that longer-term concerns include capital flow management, financial stability and currency substitution.
These remarks are significant in light of ongoing debates about whether India should ban private cryptocurrency. The RBI has repeatedly highlighted the macroeconomic risks posed by India’s unregulated private cryptocurrency market. The central bank is open for the idea of creating a Central Bank Digital Currency.
Indian authorities are currently working on a national law that will regulate cryptocurrency markets.
The FSR report stated that the rise in private cryptocurrencies around the world has alerted regulators and governments about the risks. This report is a collective assessment of the Sub-Committee of Financial Stability and Development Councils (FSDC) regarding risks to financial stability and resilience of the financial system.
The FSR report stated that “new illicit financing types continue to emerge”, including the use of virtual to-virtual layering strategies, which attempt to further muddy transactions in an comparatively simple, cheap, and anonymous way.”
According to the report, $2.8 trillion was the aggregate market capitalization of the top 100 cryptocurrency coins in emerging markets that are subject capital controls. Residents can also access crypto assets without being required to register, which could undermine capital regulation.