The Indian crypto community continued to advocate that digital currency has the potential to transform the country's financial system, generate employment opportunities and unlock economic prospects, even as the Reserve Bank of India (RBI) made a strong case for banning cryptocurrencies, saying the technology is “underpinned by a philosophy to evade government controls.”

Raising concerns about crypto, RBI Deputy Governor T. Rabi Sankar said on February 14 that it could not be defined a currency, asset or commodity, which is one reason why it should be kept out of the ambit of the formal financial system. He said banning digital currency is "perhaps the most advisable choice open to India."

Also read: Cryptocurrencies can wreck banking system, undermine monetary policy: RBI Deputy Guv

While it is difficult to ban cryptocurrency, the government can use taxation and bring in KYC regulation to put a check on digital currencies, Mirror Now quoted Manoj Jain, CEO of Pint Wallet, as saying.

BANNING CRYPTO MOST ADVISABLE: RBI DEPUTY GOVERNOR

RBI Deputy Governor stated that they examined whether #cryptocurrency should be regulated but there are strong reasons to keep them away from formal financial system.Manoj Jain, CEO, Pint Wallet shares his views on statement. pic.twitter.com/AUGndVwGN5— Mirror Now (@MirrorNow) February 15, 2022

Also read: Anonymity of cryptos fast becoming a myth: Jonathan Bowman

RBI’s concern around cryptocurrencies is aligned with the alarms raised by the central banks of many other countries around the world, The Economic Times quoted Kashif Raza, Founder of crypto education platform Bitinning, as saying.

The government and the regulators have taken a consultative approach to the industry, which is a welcome move, Ashish Singhal, Founder and CEO of CoinSwitch, told the Economic Times. It is also very encouraging to see India thinking progressively about digital currencies like the US, Dubai and Singapore, Singhal said.

Also read: Crypto tax: Govt may explore set-off relief to digital currency traders: Report

If digital currencies are nurtured in a healthy regulatory environment, they have the potential to transform the country's financial system, Shivam Thakral, CEO of BuyUcoin told The Economic Times.

Earlier, while speaking at a webinar, Nischal Shetty, Founder and CEO of crypto exchange WazirX, had said India has recognised digital currency at the right time, which presented a huge opportunity to the country.

Saying cryptocurrencies could be worse than Ponzi schemes, Rabi Sankar said they have no intrinsic value and also undermine financial integrity such as the KYC regime.

“Cryptocurrencies have specifically been developed to bypass the regulated financial system," Rabi Sankar said at the 17th Annual Banking Technology Conference and Awards of the Indian Banks’ Association (IBA).

RBI’s stance comes on the heels of the Finance Minister Nirmala Sitharaman saying the government and the central bank were on the same page on the treatment of cryptocurrencies.

Also read: Sales or purchase of crypto are within ambit of GST: CBIC chairman

“Whatever the government does, we consult and have discussions with the Reserve Bank of India and therefore we take calls,” The Times of India quoted the FM as saying.

On February 11, RBI Governor Shaktikanta Das said cryptocurrencies were a big threat to the financial and macroeconomic stability of the country. The head of the central bank warned investors that they would be investing in digital currencies at their own risk.

“They (investors) should keep in mind that these cryptocurrencies have no underlying (asset)… not even a tulip,” Das had said at a press conference earlier.

Also read: RBI chief refers to 'tulip mania' as he warns against crypto; here are the biggest market bubbles in history

(Edited by : Shoma Bhattacharjee)

First Published:Feb 15, 2022 5:48 PM IST