Despite holding the trust of the world’s richest and most influential men, cryptocurrency is still not something the RBI of India supports and trusts.
Over the past few years, the value of cryptocurrencies has been skyrocketing, and today, many businesses and individuals have started investing heavily in cryptocurrencies, and opt for it as a potential payment method. Blockchain and cryptocurrency have been gaining a lot of attention from investors and traders all over the world.
What is Cryptocurrency?
Cryptocurrency is an online or virtual currency that is fully secured by cryptography and allows users to purchase goods and services. It does not depend on banks for verifying any transaction, but instead maintains a public ledger of transactions as immutable blocks on the blockchain.
Does the RBI support cryptocurrency?
It has been pretty clear that the trust that the Reserved Bank of India holds for cryptocurrency is not much. In 2018, the central bank had issued a circular asking banks and other entities regulated by the RBI not to deal in virtual currencies (VCs) or “provide services for facilitating any person or entity in dealing with or settling VCs”. This ‘ban’ was denied by the Supreme court in March last year on the ground of it being not proportionate.
However, despite that, RBI has stood with it’s view towards cryptocurrencies and has conveyed to the government its decision to seek a ban on such instruments, having already expressed its serious concerns.
In an interview with CNBC TV-18 in February, Reserve Bank of India (RBI) governor Shaktikanta Das said that the central bank has “certain major concerns about cryptocurrency” and its impact on financial stability. Das also said that he had conveyed his concerns to the Indian government, which is scheduled to table a bill in the parliament banning private digital currencies.
While cryptocurrency is flourishing and is being embraced by billionaires like Elon Musk, India’s central bank doesn’t seem to have faith in cryptocurrencies.
Here are some reasons why:
Concerns regarding Money Laundering and Security
The crypto market is very different from the stock market. In cryptocurrency, it is possible for investors and and traders to keep their identities anonymous. Even now, after Bitcoin reached unattainable heights, it is still a mystery as to who owns it all. This anonymity makes it difficult to keep a track of the flow of money, and makes it easier for many to take part in illegal trading activities such as money laundering.
Lack of Control
From all types of currencies, to gold, to the stock market, the RBI has everything under it’s control; .except the crypto market. This ultimately makes cryptocurrencies the rivals of the central bank, leading to the RBI’s mistrust and opposition regarding cryptocurrency.
Also Read: Is DogeCoin The New Bitcoin?
Another reason as to why the RBI does not support the crypto market is because it is extremely volatile. This means that it is very easy to sway it’s price levels, since it does not derive its value from any assets or earnings.
For example, only in February this year, the value of Bitcoin touched an all time high right after Tesla’s CEO Elon Musk decided to invest $1.5 billion in it. However, it also dropped by 10% after Musk said that the price of bitcoin seems high. Similarly, every time Musk tweets something in favour of dogecoin, it goes insanely high, despite it just being a cryptocurrency that was created as a joke.
This tells us that the power to sway the princes of these cryptocurrencies lies in the hands of what the most influential men in the industry, and what the investors are willing to pay.