Indian central financial institution RBI says crypto is weak to fraud and poses fast client safety dangers

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India’s central bank, the Reserve Bank of India (RBI), has warned of several risks that cryptocurrencies pose to the country’s financial stability. “They are also prone to fraud and extreme price volatility,” claims Apex Bank, emphasizing that “cryptocurrencies pose immediate customer protection and anti-money laundering (AML) / anti-terrorist financing (CFT) risks.”

Evaluation of the cryptocurrency by the RBI

The Indian central bank, the Reserve Bank of India (RBI), released its semi-annual Financial Stability Report (FSR) last week. The 144-page document contains a section on “private cryptocurrency risks”. The term “private” refers to all cryptocurrencies that are not issued by RBI, including Bitcoin and Ether.

The central bank wrote:

The global spread of private cryptocurrencies has made regulators and governments aware of the risks involved.

“Private cryptocurrencies pose immediate risks for customer protection and the fight against money laundering (AML) / fight against terrorist financing (CFT),” emphasized the RBI.

In addition, the central bank noted, β€œBecause of their highly speculative nature, they are also prone to fraud and extreme price volatility. Longer term concerns relate to cash flow management, financial and macroeconomic stability, monetary policy transmission and currency substitution. “

The report also cites the results of the Financial Action Task Force (FATF), which states that “The virtual asset ecosystem is experiencing the rise of anonymity-enhanced cryptocurrencies (AECs), mixers and tumblers, decentralized platforms and exchanges, privacy wallets, and others has types of products and services that enable or permit reduced transparency and increased obfuscation of financial flows. ”The RBI emphasized:

New types of illegal funding continue to emerge, including the increasing use of virtual-to-virtual layering schemes that seek to move on muddy transactions in a comparatively simple, cheap, and anonymous way.

The RBI found that the market capitalization of the top 100 cryptocurrencies has reached $ 2.8 trillion and warned: “In the emerging markets” [emerging market economies] subject to capital controls, free access to crypto assets for residents can undermine their capital regulatory framework. “

The report also looks at decentralized finance (defi), which “was recently identified by the Bank for International Settlements (BIS) as a threat of power concentration,” said the Central Bank of India, adding:

The rapid growth of decentralized finance (defi) is primarily geared towards speculation and investment and arbitrage in crypto assets rather than the real economy.

The RBI added that the AML and Know-Your-Customer (KYC) restriction “along with transaction anonymity exposes Def to illegal activity and market manipulation and raises concerns about financial stability”.

The Central Bank of India has repeatedly stated that it has great and serious concerns about the cryptocurrency. In its most recent central board meeting, the RBI called on the government to ban cryptocurrencies entirely, stating that a partial ban would not work.

Meanwhile, the Indian government has delayed the introduction of a cryptocurrency law. A bill was due to be dealt with in Parliament’s winter session, but it was not taken. The government is reportedly revising the law.

Tags in this story

AML, Anti-Money Laundering, BIS, CFT, Decentralized Finance, DeFi, Fatf, Financial Action Task Force, Financial Stability, Illegal Activities, Central Bank of India, KYC, Market Manipulation, Private Cryptocurrencies, RBI, Reserve Bank of India, Stablecoin

What do you think of the Central Bank of India warning about cryptocurrencies? Let us know in the comment section below.

Kevin Helms

Kevin, a student of Austrian economics, found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the interface between economy and cryptography.

Photo credit: Shutterstock, Pixabay, Wiki Commons

Disclaimer of liability: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement for any product, service, or company. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author are directly or indirectly responsible for any damage or loss caused or allegedly caused by or in connection with the use of or reliance on the content, goods or services mentioned in this article.

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