RBI Guv: RBI Guv flags major concerns over cryptos’ impact on financial stability
This is a reiteration of the long-held stance against the use of virtual currency in India. Das, speaking during the Monetary Policy Committee (MPC) press conference, said that RBI’s concerns have been conveyed to the government as well.
“There is no change in RBI’s position (on cryptocurrency) …We have major concerns around cryptocurrency which have been conveyed to the government as well,” Das said.
The statement comes just a few days after the central bank issued a circular that prohibits Indian banks from referring to its now-scrapped April 2018 circular cautioning customers for trading in cryptocurrency.
The 2018 circular had banned all regulated banks from holding or facilitating cryptocurrency. This was struck down by the Supreme Court in February 2020 after a petition by Internet and Mobile Association of India (IAMAI) and crypto exchanges in India.
“Our circular clarifies our position very clearly that the Supreme Court set aside our 2018 circular. It came to our surprise that banks were citing the old circular in their correspondence with customers,” said Das. “We wanted to set the record straight that as the circular has been made invalid, it is not at all correct to cite the circular.”
“The central bank doesn’t give any investment advice. It is on each investor to make his own appraisal and take a careful and prudent call on their own investments,” Das added, when asked how crypto investors in India should view the purchase of these assets.
ET reported on May 30th that leading Indian financial institutions were clamping down on customers using bank accounts for cryptocurrency transactions. Over the past few months, lenders such as HDFC Bank and SBI Card had sent official notices to many customers purchasing cryptocurrency warning them of curbs, including permanent closure of accounts.
Das in February made a similar statement during a television interview where he expressed the central bank’s concerns around the unrestricted use of virtual currencies and its impact on India’s financial stability. He had at the time said that the government is aware of RBI’s position on cryptocurrency.
As per the RBI’s latest circular issued on May 31, the central bank asked regulated financial institutions to continue carrying out the due diligence process prescribed under existing regulations. These include checks around Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) rules as well as compliance with Foreign Exchange Management Act (FEMA) guidelines for overseas remittances.
Meanwhile, speculation is rife about the fate of India’s draft Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which was expected to be tabled in the budget session that concluded in April. The proposed legislation is based on the recommendations of a parliamentary committee headed by former finance secretary Subash Garg. ET has reported that the draft bill could be referred to a standing committee before being tabled in parliament.
The bill, in its current form, could criminalize not just trading but holding of cryptocurrency assets.
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