SUMMARY
RBI Deputy Governor says making regulations in the absence of adequate information could entail issuing the wrong set of prescriptions
T Rabi Sankar notes that it is important to collect ‘adequate, reliable and consistent information’ before delving deeper into whether cryptocurrencies ought to be regulated
Sankar also urged the global agencies to take a leading role in helping regulate cryptos
The Reserve Bank of India Deputy Governor T Rabi Sankar has called for gathering more data with regards to cryptocurrencies before formulating regulations to avoid issuing ‘wrong set of prescriptions.’
“Data is not available. Whatever data is available is misleading. And making regulations in absence of adequate information carries a very high probability of us actually ending up with the wrong set of prescriptions,” said Sankar.
Speaking at a virtual roundtable organised by the International Monetary Fund (IMF), Sankar noted that data on cryptocurrencies was scarce, adding that the entire debate on crypto had poor foundations when it came to data.
He highlighted the need for collecting ‘adequate, reliable and consistent information’ before delving deeper into how and whether the cryptocurrencies ought to be regulated.
Calling for more regulation, Sankar also batted for the formulation of an initiative modelled after the Organisation for Economic Co-operation and Development’s (OECD’s) Crypto-Asset Reporting Framework. He said that such initiatives would enable member countries to exchange information in real-time.
Sankar also urged the global agencies, including the IMF, to take a leading role in helping regulate cryptos.
On the regulation front, he called for building all related rules on a clear understanding of what cryptocurrencies are and what they are supposed to do. He also called for a single communication across the board for effective regulation of crypto.
“If we want to talk about regulation in general terms, there is a risk that we would give a general sense of approval to these instruments,” he added.
Lashing out, he also said that the ‘implicit approval’ accorded by regulators to crypto assets had helped fuel the crypto mania of recent years.
“We as regulators, as public authorities, need to be a little more forthright in the way we deal with new concepts, like crypto assets, that come to the fore. I would suspect that the crypto craze would not have attained the proportions it did over 2020 and good part of 2021 if there was not some sort of an implicit acceptance (from regulators) that they could be useful,” added Sankar.
This is more or less in line with the earlier statements made by the top brass of the central bank about cryptocurrencies. While the government has been measured in speaking about cryptos, RBI has explicitly and publicly panned the digital currencies.
RBI bankers have, at times, called cryptocurrencies a threat to India’s ‘macroeconomic stability’ while, on other instances, compared it to the Tulip Mania of 1630s.
The central bank along with the union government has also pitched multiple nations and international agencies for a concerted approach to curb misuse of digital currencies for money laundering and promotion of terrorism.
The RBI also developed the country’s very own central bank digital currency (CBDC) to address the supposed dangers of private digital currencies. In the following chain of events, the RBI also piloted a CBDC project on November 1 for wholesale users, and then eventually rolled it out for retail users beginning December 1.
With the RBI has been bullish about new developments, the space continues to operate under the dark shadow of recent crypto crashes and crypto winter which have made investors wary. While the retail investor sentiment is still not at healthy levels, it remains to be seen whether the allure of CBDC does anything to spur the Indian crypto arena.
