RBI warns cryptocurrency may impact financial stability

Wednesday 5 January 2022 11:14 CET | News

The Reserve Bank of India (RBI) has warned about multiple risks cryptocurrency poses to the country’s financial stability. 

RBI published its biannual Financial Stability Report (FSR) which includes a section on ‘private cryptocurrency risks’. The term ‘private’ refers to all cryptocurrencies that are not issued by the RBI, including Bitcoin and Ether.

The report also references the finding of the Financial Action Task Force (FATF) which states that the virtual asset ecosystem has seen the rise of anonymity-enhanced cryptocurrencies (AECs), mixers and tumblers, decentralised platforms and exchanges, privacy wallets, and other types of products and services that enable or allow for reduced transparency and increased obfuscation of financial flows.

The report also addresses decentralized finance (DeFi), which has recently been flagged by the Bank of International Settlements (BIS) as carrying the danger of concentration of power. The RBI added that the limitation of AML and Know Your Customer (KYC) provisions, together with transaction anonymity, exposes DeFi to illegal activities and market manipulation and poses financial stability concerns.

In November 2021, India announced it will go ahead with its plan to ban most cryptocurrencies in the country under a long-awaited bill. Meanwhile, the Indian government has delayed introducing a cryptocurrency bill. A bill was listed to be considered in the winter session of parliament, but it was not taken up.

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Keywords: central bank, banks, RBI, cryptocurrency, fraud management
Categories: DeFi & Crypto & Web3
Companies: Reserve Bank of India
Countries: India
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DeFi & Crypto & Web3

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