Governor Shaktikanta Das said on June 4 that the Reserve Bank of India (RBI) has serious concerns about cryptocurrencies, which it has expressed to the government, and that his view on digital coins has not changed.
Das’ remarks come just days after the RBI published clarification warning banks against utilizing their services to trade in cryptocurrencies, which have sparked a surge in interest among Indians despite the fact that 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.
During its bi-monthly policy review, the MPC kept key rates steady, as expected.
“There is no change in our position. Our circular clarifies our position very well,” Das said in answer to a question on its May 31 circular that was seen as a reference to cryptocurrency transactions by some.
The RBI became aware that certain banks were still referring to its 2018 circular prohibiting banks from transacting in cryptocurrency after it was overturned, and the central bank sought to “put the record straight,” according to Das.
The Reserve Bank of India clarified on May 31 that banks and other regulated companies cannot use its 2018 cryptocurrency circular because it was overturned by the Supreme Court in March 2020.
The RBI has asked banks to conduct customer due diligence in accordance with regulations governing Know Your Customer, anti-money laundering, counter-terrorist financing, and regulated entity requirements under the Prevention of Money Laundering Act.
The RBI had previously stated that banks must comply with the Foreign Exchange Management Act (FEMA) for international remittances.
The RBI circular, titled Customer Due Diligence for Transactions in Virtual Currencies, came after major Indian banks warned clients against trading in cryptocurrencies through their services.
A cryptocurrency is a form of digital money that is decentralized and based on blockchain technology, which is a distributed database that can be accessed by a network of computers. Some of the most popular cryptocurrencies are bitcoin, ethereum, and dogecoin.
The government has yet to express its opinions or policies on cryptocurrencies, but that hasn’t stopped Indians from participating in the global crypto wave.
Around 1.5 million Indians have invested Rs 15,000 crore in cryptocurrencies, according to data from crypto exchanges. In the blockchain and cryptocurrency space, there are over 350 firms. The need for crypto exchanges like BuyUcoin and others has increased.
The government has proposed a cryptocurrency and regulation of official digital currency laws for 2021, which would make any trades in digital tokens illegal, but no date has been set for its introduction in Parliament.