The cryptocurrency tax was the first step taken by the Government of India to bring cryptocurrencies under some form of regulation. However, it seems more is in store, especially taking the statements by the country’s RBI Deputy Governor in context with crypto assets. In one of the most strongly-worded statements, the RBI Deputy Governor labeled cryptocurrencies as Ponzi schemes and asked for a complete ban on cryptocurrencies.
In May, T Rabi Shankar, who took charge as the Deputy Governor of RBI, is a strong critic of cryptocurrencies.
RBI Governor calls for an outright ban on crypto
Sankar gave his keynote address at Indian Banks’ Association (IBA’s) Annual Banking Technology Conference & Awards on February 14 said, “Banning cryptocurrency is perhaps the most advisable choice open to India. We have examined arguments by those advocating cryptos should be regulated and found that none of them stand up to basic scrutiny.”
Sankar indicted crypto as a system that has been designed to evade government controls and customized to bypass regulated financial systems–especially the Know-Your-Customer regime and AML/CFT regulations (anti-money laundering and counter-terrorism financing). He, therefore, called for extreme caution while dealing with cryptocurrencies.
The RBI Deputy Governor labeled cryptocurrency as something which can never fit in the definition of a currency since it has no intrinsic value and neither underlying cash flows.
‘Cryptocurrencies could wreck the system’
Sankar said, “Cryptocurrencies can and, if allowed, most likely will wreck the currency system, the monetary authority, the banking system, and in general the government’s ability to control the economy. So it would serve us well if understanding of cryptos goes beyond the hype and gets rooted in reason, pragmatism.”
Earlier in February, the RBI Governor Shaktikanta Das had warned investors that investing in highly volatile assets had huge risks and that cryptocurrencies have no underlying values. Terming Private Cryptocurrency as a massive threat to macro-economic stability and financial stability, Das referred to the Dutch tulip bubble or the ‘tulip mania.
The Tulip mania occurred between November 1636 and February 1637, and the prices of Tulip rose by over 20 times. When the bubble collapsed, prices of tulips fell by over 99 percent.