Far deeper issues involved: RBI chief on India’s changing stance on crypto

Reserve Bank Governor Shaktikanta Das said Tuesday that India needs to have more in-depth discussions about cryptocurrencies, as the government drafts legislation to regulate private virtual coins.

“When the central bank says that we have serious concerns from the point of view of macroeconomic and financial stability, there are far deeper issues involved,” Das said at the State Bank of India’s Economics Conclave. “I’m yet to see serious, well-informed discussions in the public space on these issues.” 

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The Indian government’s stance on cryptocurrencies has changed over time, going from nearly outlawing them to having them reinstated by the courts. There have been calls for stricter regulations on virtual coin transactions, arguing that an unregulated environment could drive more domestic savings into the asset class.

The finance ministry is developing legislation to govern such assets. Officials said the government was planning progressive measures on the issue following Prime Minister Narendra Modi’s recent review meeting, but unregulated crypto markets could become avenues for laundering money and financing terrorism.

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“Anecdotally, and even otherwise, we have received a lot of feedback that credit is being provided to open accounts, and various kinds of incentives are being provided,” Das said.

“The value of transactions and trading has gone up but the number of accounts is exaggerated,” he said, and added that about 70%-80% of the virtual currency accounts have a balance of less than ₹ 2,000 ($27).

At a recent event, the RBI governor stated that new-age currencies pose serious threats to the country’s macroeconomic and financial stability, as well as doubting the number of investors trading on them and their claimed market value. 

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The Supreme Court overturned an RBI circular issued on April 6, 2018, restricting banks and entities regulated by it from offering services related to virtual currencies on March 4, 2021.