A month after India’s central bank acknowledged that it had cracked down on digital currencies without much deliberation, it has finally spelled out the explanations behind its uneasiness with bitcoin and other cryptocurrencies.
RBI to IAMAI on Matter of Cryptocurrencies in India
The Reserve Bank of India (RBI) is particularly concerned about the protection of the investors, the anonymity of transactions, and the digital currencies’ lack of innate value, it told to the IAMAI (Internet and Mobile Association of India) on July 11.
The central bank had raised these concerns before, as well, however it listed them out clearly.
IAMAI counts bitcoin exchanges as members. Even then, it had reached out to the central bank last month recommending possible ways in which the industry can be regulated for addressing RBI’s concerns.
The Reserve Bank of India, in April, had directed banks to close down all the cryptocurrency-related bank accounts by the first week of July
Staggered by the regulator’s move, a few exchanges took it on legitimately. However, the Supreme court told them in May 2018 to rather engage with the RBI.
Even the apex court gave its refusal to stay the RBI’s April order, but directed it to answer to the suggestions given by the exchanges.
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What Is This Debate About?
One of the primary reasons referred to by the RBI for its crackdown is to shield the investors and banks from the frauds, said an individual from the IAMAI who had a copy of the Central Bank’s response.
He stated –
“It has said that it wants to ring-fence gullible investors and lenders from scams, several of which have happened internationally.”
There has been a surge in crypto-related scams in India, as well. However, the exchange argue that an indiscriminate ban is not the way to deal with this.
The chairman and CEO of Belfrics, Praveen Kumar, said –
“By limiting transactions via bank accounts and allowing more cash-related transactions, RBI is allowing more people to get duped. Instead, they need to regulate the exchanges and lay down guidelines that can help prevent these frauds.”
The CEO of a New Delhi-based digital currency exchange, said –
“Moreover, frauds happen wherever money is involved, including at banks; it doesn’t mean the system must be choked.”
Another reason referred to by the RBI is the anonymity of the exchanges and, in this way, the difficulty in tracking the source of the transaction.
The organizations have negated this, as well, guaranteeing strict adherence to know-your-client standards to avoid illegal tax avoidance.
Moreover, all the transactions are normally done by means of ledger exchanges to keep a tab on the money trail.
The RBI has additionally expressed the concerns regarding the no intrinsic value of the cryptocurrencies since they are not backed by any assets.
The CEO of another digital currency exchange, requesting anonymity, said –
“This is not entirely true. For instance, in order to run certain computer programs, you can pay using ether. Moreover, as the market matures and more people and institutions start using it, there can be more use cases that can boost its intrinsic value.”
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The member of IAMAI rue that the central bank has turned a deaf ear to their suggestions for strengthening the framework.
One of the cryptocurrency exchange CEOs, said –
“Even earlier it had laid down similar reasons but refuses to look closely at our recommendations on how it can be addressed.”
Now, let’s see Will Cryptocurrencies Be Legalised In India?
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