Concerns on crypto stem from money laundering, valuation concerns: Former RBI DG
Mumbai: Former RBI Deputy Governor NS Vishwanathan on Wednesday said money laundering and lack of clarity on valuations are the primary concerns of central banks in being circumspect about the introduction of cryptocurrencies.
If the government goes ahead and allows cryptocurrencies, bankers need to be wary and not confuse persons' wealth with the amount of crypto assets they hold even if they do not use it as collateral for lending, Vishwanathan said.
The comments come amid a heated debate over whether to allow private cryptocurrencies into India, which has seen the RBI being vocal about its concerns, while the government seems to be more amenable. RBI Governor Shaktikanta Das had on Tuesday reiterated his concerns over cryptocurrencies, saying there are 'far deeper issues' involved in virtual currencies that could pose a threat to the country's economic and financial stability.
The government is likely to introduce a bill on cryptocurrencies during the winter session of Parliament, beginning November 29. Vishwanathan said world over, central banks are concerned with cryptocurrencies and wondered what makes governments more supportive of it. "The central bank's concerns come from two fundamental areas. One, of course, is that crypto-assets are seen as a possible source of money laundering, number two is that the valuations," he said, speaking at the 8th SBI Banking and Economic Conclave.
He said we should not confuse cryptocurrencies with dematerialisation, where there is an underlying asset, which comes up in a digital form. The career central banker added that we do not know what defines a value of a crypto asset, and the limited understanding is demand-supply forces govern the value. The value of bitcoin, probably the most popular among the crypto assets, "gyrated" to $10,000 and swings between $7-17,000 per coin, he noted. Vishwanathan said a person's crypto holdings should not determine the wealth because the constant volatilities in the value can make a rich person seem poor or vice-versa. Bankers should be extra careful and should not look at the crypto holdings while assessing a wealth of a potential borrower and should not lend against such assets, he added.