It appears the root cause of concern is the potential for digital assets to disrupt the rise of India as a global power.
On Thursday, the Reserve Bank of India, or RBI, the country’s central bank, published a critical bulletin regarding the cryptocurrency industry. While the report praised the innovative distributed ledger technology associated with digital currencies, the RBI dismissed arguments calling for the regulation of such assets and called for an outright ban. RBI’s core concerns were related to cryptocurrencies threatening the country’s financial sovereignty. The RBI wrote:
“Historically, private currencies have resulted in instability and therefore, have evolved into fiat currencies over centuries. The retrograde step back to private currencies cannot be taken simply because technology allows it without considering the dislocation it causes to society’s legal, social and economic fabric.”
According to the RBI, an increase in the adoption of cryptocurrencies would lead to a danger of crypto replacing the Indian rupee, thereby undermining authorities’ control of monetary policy. In addition, the RBI does not appear to be convinced by arguments citing the relative laissez-faire regulation of cryptocurrencies in developed countries, such as the United States, as a basis that India should do the same:
“Almost all cryptocurrencies are priced in terms of Dollars. If cryptocurrencies replace emerging market currencies, that will give developed markets better strategic control over the EMs.”
There appears to be little concern regarding how such a proposed ban would affect everyday Indian crypto enthusiasts, however. While the RBI suggested that individual investors would be provided with “reasonable exits” as to not lose money, it also said:
“Persons who have invested in these instruments are fully aware of the risks involved. Investors who have acquired these instruments have done so with their eyes wide open, at their own risk, and do not warrant any regulatory dispensation.”
India currently faces a chaotic regulatory requirement regarding cryptocurrencies. While some entities, such as the RBI, are in favor of banning crypto, others such as the Indian government want to regulate the sector instead of enacting a blanket ban.