Private cryptocurrencies are potential risks to customer protection and anti-money laundering (AML) and combating the financing of terrorism (CFT), the Reserve Bank of India (RBI) said in its Financial Stability Report (FSR) on December 29.
“They are also prone to frauds and extreme price volatility, given their highly speculative nature. Longer-term concerns relate to capital flow management, financial and macro-economic stability, monetary policy transmission and currency substitution,” the report said.
These comments came at a time of an ongoing debate on whether India should opt for private cryptocurrencies or not. The RBI has repeatedly emphasised the deeper macroeconomic concerns that the unregulated private cryptocurrency market may pose in India. However, the central bank is mulling over the adoption of Central Bank Digital Currency (CBDC).
The Indian government is likely to put forth a national law related to regulating the cryptocurrency market.
Also, the way the market of cryptocurrency is spreading across the globe has raised alarms for the regulators and governments to address the potential risks, the FSR report said. The report is the efforts of the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks about financial stability and the resilience of the financial system.
“New illicit financing typologies continue to emerge, including the increasing use of virtual-to-virtual layering schemes that attempt to further muddy transactions in a comparatively easy, cheap and anonymous manner,” the FSR report noted.