RBI Deputy Governor: not regulating but banning crypto ‘most advisable choice’ for the Indian government
Reserve Bank of India’s T. Rabi Sankar has recently compared cryptocurrency to Ponzi schemes and said that instead of regulating, banning them would be the “most advisable choice” for the Indian government.
Currently, Deputy Governor for the RBI, Sankar, has spoken at a keynote address on February 14 and said that the audiences have also witnessed that cryptocurrencies “are not amenable to definition as a currency, asset or commodity.”
Sankar further explained that cryptocurrencies are neither currencies nor financial assets, not even real assets or digital assets, so they cannot be regulated by any financial sector regulator. Likewise, it won’t be possible “to regulate something that one cannot define.”
Sankar believes that regulating cryptocurrencies would amount to ultimately condoning their usage as a store of value and as a currency in some cases. Thus, merely regulating it could be like encouraging its usage within the framework that is laid out by the government. However, he has acknowledged that some people would still use crypto if it is banned, similar to “drug trafficking,” which is “a rampant phenomenon despite a ban.”
Sankar even pointed out that permitting cryptocurrencies to exist in a fiat-dominated ecosystem would have a “destabilizing effect” on both the monetary and fiscal stability of a country. If crypto is regulated for usage as an investment asset, Sankar said that its utility would rise as a store of value, thus drawing more users away from the Rupee.
Sankar also attacked the true value of cryptocurrencies, saying that unlike the value of the Rupee, which is anchored by monetary policy and its status as legal tender, the value of crypto assets are “solely on the expectation that others will also value and use them.”
India is one of several countries where crypto companies and lawmakers have been demanding greater regulatory clarity for guiding their actions. Without such clarity, it is difficult for businesses formulating long-term plans for the products and services that they would make, being assured that these would not break any laws.
India’s Finance Minister, Nirmala Sitharaman, on February 11 had said the Indian government could not immediately decide whether they want to legalize or ban crypto, therefore leaving the Indian crypto community in a prolonged state of regulatory limbo.
The Indian government has reportedly been experimenting with deploying a central bank digital currency (CBDC), Sitharaman had revealed on February 1, adding that the government is expecting to launch a digital rupee program by 2023 in order to boost economic growth.