India’s central bank has taken yet another contrary stance on cryptocurrencies. The Reserve Bank of India has emphasized the different risks associated with digital assets in its latest Financial Stability Report for 2024 published on December 30th.
The remarks reinforce the long-standing anti-crypto position of the nations central bank. However, the stance also contrary to the global trend of nation’s accepting cryptocurrencies and trying to incorporate them in their economies to enhance growth.
India’s RBI Warns of Digital Asset Perils
Even though cryptocurrency adoption exploded in India this year at the grassroots level, the RBI issued a warning, stating that unrestrained use of digital assets, such as stablecoins, could loosen monetary controls, create backdoors for capital flight, and “divert resources available for financing the real economy.”
Although the Indian cryptocurrency sector “remains small,” the regulator claims that the growing divide between traditional and decentralized finance could provide systemic problems, with stablecoins adding the possibility of possible run hazards.
The stance comes as one of the many jibs that RBI has taken on the Crypto sector in the nation.
RBI’s Previous Anti-Crypto Stance
The Reserve Bank of India has not been on-board with the digital asset sector and has expressed its ongoing stance time and again. Previously, the nation’s central bank had said that cryptocurrency cannot be called “currencies” because it has no inherent value.
Bitcoin and other digital currencies have drawn criticism from the Reserve Bank of India (RBI), which claims that they represent a systemic risk to the financial institutions.
Why is India Still Not Board With Crypto Reforms?
The main bone of contention between the Indian govern, RBI and the crypto sector is its decentralized nature and involvement in illicit activities.
Concerns regarding financial stability, consumer protection, and the possible abuse of cryptocurrencies for illegal purposes have all been raised by the Indian government.
The government’s intention to regulate the industry was indicated in 2021 with the submission of the “Cryptocurrency and Regulation of Official Digital Currency Bill.” This measure restricted private cryptocurrencies while proposing that the RBI create an official digital currency.
The government’s strategy for striking a balance between innovation and regulation is reflected in the bill, even if it has not yet been passed.
However, the rise and growth of the crypto diaspora in the Indian investor segment has resulted in some relief from the government’s side.
Previously, the Income Tax Appellate Tribunal had provided clarification saying that the proceeds from Bitcoin sales should be classified as capital gains rather than income under ITAT.
Given the government’s previously stringent and avoidant approach, the new verdict is a more liberating move for the Indian crypto industry, which has been searching for a stable trajectory.
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