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RBI urges global regulators to unite on blockchain regulation

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HIGHLIGHTS :

  • RBI had sought a ban on cryptocurrencies last year
  • The central government says this segment will not be banned
  • Transactions on the blockchain are difficult to track

Recently, Chief Economic Adviser V Anantha Nageswaran said that due to the absence of a centralized regulatory authority for the crypto segment, it is similar to the territory occupied by Caribbean pirates.

RBI had sought a ban on cryptocurrencies last year

The Reserve Bank of India (RBI) has emphasized creating a global consensus for the regulation of blockchain platforms and decentralized finance (DeFi) based on new technologies. RBI had sought a ban on cryptocurrencies last year. However, the central government says that it will not ban this segment completely.

RBI Governor Shaktikanta Das said at a conference, “Is there a need for coordination for regulation? Does a regulator need to collaborate with other regulators abroad? Technology goes beyond the regulatory or the country’s purview. A great example is blockchain technology. Different blockchain platforms cannot be tied to a single regulator or a particular country. Another example is DeFi, where financial applications are processed on a single blockchain with minimal intervention from centralized intermediaries. ”

The central government says this segment will not be banned

He said that DeFi poses a new challenge for regulators because of its unknown nature and the lack of control of centralized authority over it, and its legal status is unclear, making it difficult to regulate in the usual way. This requires cooperation between regulators at the global level. Recently, Chief Economic Adviser V Anantha Nageswaran said that due to the absence of a centralized regulatory authority for the crypto segment, it is similar to the territory occupied by Caribbean pirates. Nageswaran recognizes that cryptocurrencies like normal currencies do not meet the basic requirements of store value, mass acceptability, and units of account.

Transactions on the blockchain are difficult to track

“With cryptocurrencies being more decentralized and the absence of any centralized regulatory authority, it amounts to an area without control,” he had said. Regarding Decentralized Finance (Defi), he said, “It is being considered innovation but I would not make any conclusions about it being innovative or making a big difference in a positive way.” Nageswaran said that as an alternative to normal currency, cryptocurrencies need to serve a number of purposes

In a speech to bankers on Monday, RBI deputy governor T Rabi Sankar demolished all the arguments for allowing cryptocurrencies in India as none of them pass basic scrutiny.

On the argument that advanced economies (AE) have not resorted to banning such currencies, the deputy governor said it is in the interest of those economies not to ban cryptos because they are not a threat to convertible currencies (most cryptos are priced in the dollar) as they are to the rupee.

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