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Cryptocurrencies - An assessment (Keynote address delivered by Shri T Rabi Sankar, Deputy Governor, Reserve Bank of India - February 14th, 2022 - at the Indian Banks Association 17th Annual Banking Technology Conference and Awards) Shri Goel, Chairman IBA, Shri Mehta, Chief Executive IBA, Prof
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FAQ :
The RBI argues that cryptocurrencies do not fit the traditional definitions of currency, financial assets, or commodities as they lack an issuer, intrinsic value, underlying cash flows, or tangible utility.
The RBI questions the useful economic role of cryptocurrencies, stating that their volatility hinders their use as a medium of exchange and that they do not serve a need not already met by existing financial instruments.
The RBI identifies risks such as undermining the national currency (like the Rupee), potentially leading to 'Dollarization' of the economy, weakening monetary policy control, and impairing financial stability.
The RBI notes that cryptocurrencies' design bypasses integrity controls like KYC and AML/CFT rules, making them attractive for illegal transactions and posing substantial implications for financial integrity frameworks.
The RBI views cryptocurrencies as speculative assets, comparing their potential for impressive returns to that of tulips in 17th century Netherlands, and suggests their value could collapse if a threshold number of people opt out.
Based on the assessment, the RBI does not appear to see a case for legitimising cryptocurrencies in India, despite arguments for regulation due to the underlying blockchain technology and existing investments.
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