The Reserve Bank of India (RBI) has major concerns about cryptocurrencies which it has conveyed to the government and there has been no change in its position on digital coins, Governor Shaktikanta Das said on June 4.
Das comments come a few days after the RBI issued a clarification as banks warned customers against using their services for trading in cryptocurrencies, which have seen a booming interest among Indians even though they operate in a grey area.
"We have major concerns on cryptocurrency, which we have conveyed to the government. With regard to advice to investors, well, central banks don't give any investment advice. It's up to each investor to make his own appraisal, to do his own due diligence and take a very careful call with regard to his own investments," Das said during a press conference after sharing the outcome of the monetary policy committee (MPC) meeting.
The MPC, as expected left key rates unchanged, during its bi-monthly policy review.
“There is no change in our position. Our circular clarifies our position very well,” Das said in response to a query on its May 31 circular that was read by some as a nod to cryptocurrency transactions.
It came to RBI’s attention that some banks were referring to its 2018 circular banning crypto transactions by banks even after it was struck down and the central bank wanted to “set the record straight”, Das added.
On May 31, RBI issued a clarification, saying banks and other regulated entities cannot cite its 2018 circular on cryptocurrencies as it was set aside by the Supreme Court in March 2020.
The RBI asked banks to do customer due diligence in line with regulations governing standards for Know Your Customer, anti-money laundering, combating of financing of terrorism and obligations of regulated entities under the Prevention of Money Laundering Act.
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Banks needed to ensure compliance with Foreign Exchange Management Act (FEMA) for overseas remittances as well, the RBI had said.
The RBI circular, called Customer Due Diligence for transactions in Virtual Currencies, came shortly after major Indian banks warned customers against using their services to trade in cryptocurrencies.
Crypto exchanges reacted to the RBI governor's remarks with caution. “We share the same thoughts of the RBI governor for the investors— to do their own due diligence and take a very careful call with regard to their investments. As an exchange, we offer a safe and secure platform to all our users following strict KYC and AML policies," said Avinash Shekhar, co-CEO, ZebPay.
As for the concerns of the government or the RBI, ZebPay has always requested for an open discussion with players in the crypto industry to jointly find a solution that clarifies the regulatory position, takes care of concerns, and protects crypto investors, Shekhar added.
Also read: HDFC Bank withdraws its communication on cryptocurrency caution post RBI clarification
A cryptocurrency is decentralised digital money that works on blockchain technology, which is a database that is shared across a network of computers. Bitcoin, ethereum, and dogecoin are some of the popular cryptocurrencies.
The government is yet to come out with its views or a policy on cryptocurrencies but that hasn’t stopped Indians from riding the crypto wave sweeping the world.
Also read: Meet the young Indians taking the crypto plunge and making a bundle
According to data from crypto exchanges, around 1.5 crore Indians have invested Rs 15,000 crore in cryptocurrencies. As many as 350 startups are operating in blockchain and crypto. Crypto exchanges such as WazirX, CoinSwitch Kuber and others have seen a huge rise in demand.
The government has planned a cryptocurrency and regulation of official digital currency bill, 2021 that proposes to make any dealings in digital tokens illegal but there is no clarity when the proposed law will be introduced in Parliament.
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