Concerned about unbacked cryptocurrencies, not people trading crypto: RBI Deputy T Rabi Shankar

Reserve Bank of India (RBI) deputy governor T Rabi Sankar

The Reserve Bank of India's (RBI) concerns around cryptocurrencies are not around trading but about the product, i.e. the currency itself, said T Rabi Shankar, Deputy Governor, RBI.

Speaking at Moneycontrol’s Startup Conclave on July 7, Shankar said: “People trading crypto is not the concern but the unbacked cryptocurrencies and the product itself alongside its backers is the problem.”

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Other than this, Shankar also highlighted that stablecoins pegged to other currencies in emerging market economies pose several threats.

Also read: RBI Governor Shaktikanta Das: Crypto is poor gambling; shouldn't be allowed to grow

"Stablecoins pegged to currencies, for example USD are not a risk to the USA. But stable currencies pegged to other currencies in emerging market economies (EMEs) pose very serious financial stability, capital management, and monetary policy risks," Shankar said.

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Earlier, in January 2023, RBI Governor Shaktikanta Das cautioned against crypto assets in the Indian economy. Das said crypto is poor gambling and will even undermine the power of the central bank if allowed to grow unchecked.

“If crypto is allowed in India, RBI will lose control over monitoring transactions," said Das speaking at an event in Mumbai, adding it doesn’t have any underlining assets. Crypto masquerading as a financial asset is a completely misplaced argument, Das said.

Also read: Why Rajnish Kumar believes banks will be like fintechs and fintechs like banks?

Crypto ban?

In February 2023, some members of the G20 said that a complete ban on crypto should be considered.

"There were opinions expressed saying that the option of a ban or prohibition should also be considered," Das said in Bengaluru on February 25 at the conclusion of the two-day meeting of finance ministers and central bank governors.

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In 2013, RBI issued a circular where it warned traders against the use of virtual currencies. It asked traders to stay away from cryptocurrency trading and warned about the risks associated with it.

Later in 2017, RBI and the finance ministry issued a warning that virtual currencies are not legal tender.

The regulator has constantly informed about the risks concerning trading and also thought of introducing a blanket ban on them in 2018.

In May 2022, when RBI announced its intent to launch an official digital currency, Governor Das said cryptocurrencies pose a serious threat to any financial system as they are not under its regulation.