RBI Warning on Cryptocurrency: 3 Risks of Regulating Crypto

• RBI has expressed caution in formalising and regulating Cryptocurrency. Without a global agreement, the matter will remain uncertain.
• Perceived legitimacy, threat to financial stability, and the misuse factor are risks, said by the RBI on the issue
• Without global agreement and recognition, legitimising the sector can give a false impression of the industry being legal and safe to invest, says the central bank

The Reserve Bank of India (RBI) has expressed caution in formalising and regulating Cryptocurrency. The central bank warns that digital asset legitimisation could legitimise the whole sector. The constant holdback in regulating cryptocurrency rules has raised concerns and queries.

Let’s dive into the matter briefly to understand the nation’s opinion on the market.

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RBI Cautions Against Premature Recognition of Cryptocurrency

Some senior officials at the RBI have reportedly had concerns and raised them at recent panels with the Ministry of Finance. The central bank highlighted the fact that formalising rules on crypto-assets can lead to a misconception among the public regarding the markets being safe. Without global agreement and recognition, legitimising the sector can give a false impression of the industry being legal and safe to invest.

The Indian government has taken a neutral and cautious stand on the issue by imposing a 30% tax on crypto income and a 1% tax deducted at source (TDS) on transactions; it has yet to announce a framework. Discussions that happened recently highlight the oversight in the Crypto industry.

Source: Google Images

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Reasons Why Regulating Cryptocurrency is not recommended by RBI

The first and primary reason for the RBI not to recommend regulation is the perceived legitimacy. The central bank highlighted the fact that formalising rules on crypto-assets can lead to a misconception among the public regarding the markets being safe

The second reason is the threat it poses to financial stability, especially when it is not globally accepted. The third reason is said to be the misuse factor. RBI officials also stated that the potential of cryptocurrencies to be used for illegal purposes is very high.

Right now, RBI remains strong on its stance of not regulating Cryptocurrency. Until then, the position of the market remains doubtful in India. While traders expect clarity, the path of Cryptocurrency in India remain uncertain.

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