India’s central bank warns about cryptocurrency risks
TECHDIGEST – India’s central bank, the Reserve Bank of India, has warned about the numerous risks cryptocurrency poses to the country’s financial stability.
The bank said, “They are also prone to frauds and to extreme price volatility, cryptocurrencies pose immediate risks to customer protection and anti-money laundering (AML)/ combating the financing of terrorism.”
The bank published this in its biannual Financial Stability Report, saying the proliferation of private cryptocurrencies in the world had sensitised regulators and regulators and governments to the associated risks.
It said, “They are also prone to fraud and to extreme price volatility, given their highly speculative nature. Longer-term concerns relate to capital flow management, financial and macroeconomic stability, monetary policy transmission, and currency substitution.
“The virtual asset ecosystem has seen the rise of anonymity-enhanced cryptocurrencies, mixers and tumblers, decentralised platforms and exchanges, privacy wallets, and other types of products and services that enable or allow for reduced transparency and increased obfuscation of financial flows.”
According to it, the market capitalisation of the top 100 cryptocurrencies in the world has crossed $2.8tn.
It added that in emerging market economies that are subject to capital controls, free accessibility of crypto assets to residents can undermine capital regulation framework.
The report also addressed decentralised finance, saying it had recently been flagged by the Bank of International Settlements as carrying the danger of concentration of power.
“The rapid growth of decentralised finance is geared predominantly towards speculation and investing and arbitrage in crypto assets, rather than towards the real economy,” it added.