RBI Expresses Concerns about Cryptos. What about Blockchain?
The Reserve Bank of India (RBI) is concerned about cryptocurrencies’ impact on the economy. Governor Shaktikanta Das spoke about that on Wednesday. He believes that the bank and the authorities have managed the situation quite well during the entire coronavirus pandemic. Das also mentioned that the RBI has several instruments to manage liquidity. The bank will not prematurely pull out liquidity to hinder the growth.
During the interview, the governor highlighted that the Central Bank has many known and unknown tools to deal with liquidity situations. So, the market must trust RBI and take the signal from it.
According to Das, their forward guidance has been much more explicit than ever before. They also added some subtle messages on liquidity, and markets should be able to read them. The governor thinks that the signal was sufficiently clear in the February policy.
Furthermore, the governor declared that he is okay with the level of liquidity at the moment. While central banks’ messages are always a mix of subtle signals and words, all the instruments are currently on the table. They will use new instruments if required.
Why are the governor and RBI concerned about cryptocurrencies?
Das stated that they have some major concerns about the digital coins. The government is presently contemplating those hindrances. However, it will likely take a call soon, and after that, it will fall on Parliament to make final decisions.
However, the blockchain stays out of those concerns. The governor noted that blockchain technology is different, and they should exploit its benefits.
When it comes to crypto, though, RBI is worried about the financial stability angle. The last word belongs to Parliament, but the bank has already addressed it about the subject.
This is not the first time when RBI expressed its concerns about digital coins. In the past, the bank often stressed that the cryptos might be used for money laundering or terror funding. While it didn’t elaborate this time, those old concerns stay valid to this time.
So, the Indian government decided to introduce a bill in Parliament. According to reports, the lawmakers will ask to bar individuals or companies from dealing in cryptocurrencies. However, they will simultaneously create a framework for an official digital currency in India.
In 2018, the RBI already banned banks and other various regulated entities from supporting cryptocurrency transactions. Crypto frauds and scams prompted such a decision. But the Supreme Court unruled that decision last year due to a petition from crypto exchanges.
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