RBI Deputy Governor: Crypto Akin to Ponzi Schemes, Ban Most Advisable

The central bank talk continues to be detrimental for the crypto market. In India, government and regulatory scrutiny has also increased. A global crypto regulatory framework has been called for by a number of nations and regulators, including the IMF. However, the lack of a structure has prompted others to demand for blanket bans.

The crypto community met with policymakers for the first time on Friday, according to reports, after Finance Minister Nirmala Sitharaman announced her tax policy in early February. Representatives requested the government to reconsider the 30% crypto tax, according to the newspaper.

However, at the 17th Annual Banking Technology Conference and Awards hosted by the Indian Banks Association on February 14, Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar launched a scathing attack on bitcoin, saying that banning cryptocurrency is “probably the most advisable decision available in India.”

The Deputy Governor compared cryptocurrencies to a ponzi scheme and stated it is “most-advisable” for India to ban crypto assets. Cryptocurrency has no fundamental value and, in reality, acts as a gambling contract, according to Rabi Sankar, who spoke at the event. He also slammed several definitions of cryptocurrency put forth by proponents, claiming that cryptocurrency is neither a currency, an asset, nor a commodity.

“We looked at the reasons put out by individuals who believe cryptocurrencies should be regulated and found that none of them hold up under basic scrutiny,” Sankar added.

The remarks are crucial in light of the ongoing discussion over whether or not to prohibit digital currency. The deputy governor outlined a number of reasons that he believes contribute to the banking system’s concerns about private cryptocurrencies. This is likely the first time an RBI high official has publicly advocated for the prohibition of cryptocurrency.

The deputy governor’s remarks came only days after RBI Governor Shaktikanta Das cautioned crypto investors to be cautious, claiming that investing in crypto is worse than Tulipmania because it has any underlying value. One of the most well-known bubbles is the 17th-century tulipmania. Tulip bulb costs surged higher than skilled workers’ annual pay at the time.

Sankar explained that crypto-technology is based on a mindset of evading government controls, and that it was created primarily to circumvent regulated financial systems, such as the Know-Your-Customer (KYC) regime and AML/CFT rules (anti-money laundering and counter terrorism financing). “These should be sufficient justifications for treating them with caution,” he stated.

Sankar believes that cryptocurrencies have the potential to “wreck the currency system, the monetary authority, the banking system, and in general the government’s ability to control the economy” if they are allowed.