The Reserve Bank of India’s timely warning to investors to be wary of digital assets has yielded results, said central bank governor Shaktikanta Das.
In an interview with local media outlet ET Now, Das said that he is delighted with the outcome of the RBI’s warnings of risks in the digital assets market. The notice influences many investors not to invest or pull out of the market.
“I’m happy we sounded those warning signals. Anecdotally, I am aware that many people did not invest in crypto or they sort of pulled out of crypto thanks to the caution and the concern that emanated out of the Reserve Bank,” Das said.
The governor also reiterated the RBI’s long-held stance that India’s best course of action to protect investors would be to ban digital assets in the country.
The central bank has issued several warnings since its July financial stability report, which described digital assets as an emerging threat to the country’s financial system due to their high volatility, borderlessness, and lack of regulation.
The bank also cautioned that digital assets could dollarize the Indian economy because the market is majorly denominated in U.S. dollars and issued by foreign entities.
The RBI’s solution to digital assets proliferation
The RBI has a long history of opposing the digital asset market. In 2018, it restricted traditional banks from providing services to firms in the sector. The directive was overturned in 2020 by the Supreme Court. However, banks have continued to treat the industry with uncertainty.
Some digital assets firms have alleged that the country still maintains a strong shadow ban on the industry. According to Brian Armstrong, the Chief Executive Officer of Coinbase (NASDAQ: COIN), which had to end its operations in the country after the National Payments Corporation of India de-platformed it from the UPI system, the country lacks regulatory clarity for digital assets.
Meanwhile, the RBI has backed central bank digital currencies to replace digital currencies. T. Rabi Sankar, the deputy governor of the RBI, told an International Monetary Fund panel that a CBDC could wipe out the currently revolutionary use cases and advantages that blockchains and digital assets have.
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