RBI’s crypto ban talks give the shivers to small investors

Synopsis

​Previously, RBI governor Shaktikanta Das had said in a monetary policy press conference that private cryptocurrencies were a threat to the macroeconomic and financial stability of the country, and investors should keep risks in mind as such assets have no underlying value whatsoever, “not even a tulip”.

Mumbai: Tough talk by senior Reserve Bank of India (RBI) officials on cryptocurrencies is making the Indian crypto community nervous.

On Monday, RBI deputy governor T Rabi Sankar called for an outright ban on cryptocurrencies.

Previously, RBI governor Shaktikanta Das had said in a monetary policy press conference that private cryptocurrencies were a threat to the macroeconomic and financial stability of the country, and investors should keep risks in mind as such assets have no underlying value whatsoever, “not even a tulip”.
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The recent statements have added to the worries of Indian crypto investors, who were already reeling from the tax rules for digital assets announced in the budget, losses in the past two months, rising Russia-Ukraine border tensions, the US Fed’s hawkish stance, and a meltdown in technology stocks (which have a high correlation with crypto).

“The government is sending out a lot of conflicting signals. On the one hand, the FM has said that they want to foster innovation in blockchain in India, and on the other hand, the RBI officials are talking about a ban, “said Vishal Gupta, a Noida-based investor.

Speaking at the 17th Annual Banking Technology Conference and Awards of the Indian Banks’ Association, RBI’s Sankar said that cryptocurrencies could wreck the currency system, the monetary authority, the banking system, and the government’s ability to control the economy. “All these factors lead to the conclusion that banning cryptocurrency is perhaps the most advisable choice available to India,” he said.

Aditya Singh, co-founder of CryptoIndia and the creator of the popular Twitter hashtag #reducecryptotax, believes the regulator’s stance hasn’t changed much, since 2020, when it made the same arguments before the Supreme Court.

“Small investors are disappointed that the officials call crypto a Ponzi scheme. The government needs to realise that crypto is much more than just Bitcoin and altcoins. It’s about blockchain, metaverse, NFTs and building the next generation of bleeding-edge web properties,” he said.

Edul Patel, CEO and founder of Mudrex, said, “Investors feel that RBI officials are creating FUD (fear, uncertainty and doubt). These are complex issues and that require all stakeholders to put their heads together.”

Meanwhile, Indian crypto exchanges said the RBI’s view that cryptocurrencies don’t hold any value is not fair.

“Crypto’s value as an asset depends on its underlying technology and scarcity algorithms. Bitcoin, for example, derives its value as a store of wealth, similar to gold,” said Shivam Thukral, CEO of BuyUCoin.

India is not the only country where different arms of the government differ on cryptocurrencies. In Russia, the central bank wanted to ban cryptocurrencies, but President Putin and the finance ministry were in favour of regulation. In Thailand, the government had to abandon its proposed 15% tax on cryptocurrencies after facing a strong backlash.
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Updated: 02/16/2022 — 19:00