RBI Says Cryptocurrencies Are Prone To Fraudulent And Price Volatility

According to the RBI’s Financial Stability Report for December, private cryptocurrencies offer urgent concerns to client protection, anti-money laundering (AML), and countering the financing of terrorism (CFT).

“Due to their extremely speculative character, they are also vulnerable to fraud and significant price fluctuation. Capital flow management, financial and macroeconomic stability, monetary policy transmission, and currency substitution are among the longer-term concerns”, According to the research.

These remarks are significant in the light of recent arguments in India about whether or not private cryptocurrencies should be banned. The Indian government is working on enacting legislation to regulate the cryptocurrency sector.

India Going To Ban Private Cryptocurrencies

The spread of private cryptocurrencies around the world has also made authorities and governments more aware of the hazards, according to the FSR research.

The report reflects the Financial Stability and Development Council’s (FSDC) Sub Committee’s collective assessment of threats to financial stability and financial system resilience.

A user reacted on the ongoing discussion on cryptocurrencies revolving around India and wrote, “RBI wants full ban on cryptocurrencies”.

The collective market capitalization of the top 100 cryptocurrencies has surpassed $2.8 trillion, according to the RBI. It is also noted that in emerging market economies with capital controls, resident’s free access to crypto assets could jeopardise the capital regulatory system.

The RBI research also raised concerns about the rapid rise of decentralised finance. DeFi is mostly focused on crypto asset speculation, investing, and arbitrage rather than the real economy.

DeFi is vulnerable to criminal activities and market manipulation due to the insufficient application of anti-money laundering and know your customer (AML/KYC) rules, as well as transaction anonymity.”

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