RBI Deputy Governor Likens Crypto to a Ponzi Scheme, Proposes Ban

The deputy governor of India’s central bank said cryptocurrency had no place in his country’s economy and likened them to a Ponzi scheme

article-image

The RBI logo on the closed iron gate of Reserve Bank of India | Credit: Shutterstock

share

key takeaways

  • The deputy governor of India’s central bank said cryptocurrency is akin to a Ponzi scheme
  • He also said crypto was just one use case of blockchain technology and that a ban on digital assets would not affect innovation

Cryptocurrencies are akin to Ponzi schemes and have no intrinsic value, according to India’s central bank deputy governor.

T. Rabi Sankar, who spoke during the Indian Banks’ Association’s 17th annual Banking Technology Conference on Monday, said cryptocurrencies had no place in India’s economy and presented significant risks to financial stability.

“All these factors lead to the conclusion that banning cryptocurrency is perhaps the most advisable choice open to India,” said Sankar. “We have examined the arguments proffered by those advocating that cryptocurrencies should be regulated and found that none of them stand up to basic scrutiny.”

The deputy governor said the argument put forth by enthusiasts including crypto’s use as a store of value or a medium of exchange — and that they should be regulated as such — did not stand up to “basic scrutiny.” He also said he did not accept the argument that crypto advanced the development of blockchain technology.

“Even in case of private authentication through consensus mechanisms, accounts can be kept and rewards can be given in any legal tender currency,” said Sankar. “In other words, creating native cryptocurrencies is just one way of implementing a blockchain; it can be viewed as just one use case of the blockchain technology.”

Sankar said that those arguing that a ban on crypto would limit innovation in blockchain was similar to drawing the conclusion that a ban on nuclear weapons would harm advancements in nuclear physics.

While Sankar’s comments come as no surprise, the seesawing rhetoric on crypto regulation from India’s policymakers has amounted to a dizzying stance. A patchwork of ad-hoc laws has, at times, allowed private cryptos to function as digital assets, while, at others, have outlawed them.

The lack of a unified front on crypto has exposed fragmentation among the country’s policymakers on the issue of how the nascent asset class should best be policed. Earlier this month, India’s finance minister, Nirmala Sitharaman, moved to introduce a 30% tax on income received from crypto gains, raising hopes for crypto’s legitimacy as an asset class.

Last week, Sitharaman shut down expectations she was not doing “anything to legalize it or ban it [crypto]” at present and left the question as to how crypto would be regulated in India unanswered. Instead, the minister said she wanted to wait until after inputs from consultation were concluded and that taxing crypto now is the government’s “sovereign right.”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Crypto is fast and it’s only getting faster as bitcoin threatens to retest its own highs set more than two years ago

article-image

The settlement ends the legal battle over eth.link, a domain once owned by imprisoned developer Virgil Griffith

article-image

TBC President Lee Bratcher told Blockworks he’s “confident” about the Council’s case against the DOE

article-image

The Monday trading volumes total passes the previous high mark set on the fund’s first day of trading nearly seven weeks ago

article-image

The hearings are expected to last for a couple of days as the court hears arguments for and against the bankruptcy plan proposed by Genesis

article-image

Equities were mixed toward the end of Monday’s session while cryptocurrencies continued their rally