Sebastian Sinclair

<div id="highlights-block_620b0825b1a83" class="highlights">
 <ul>
 <li>The deputy governor of India&#8217;s central bank said cryptocurrency is akin to a Ponzi scheme</li>
 <li>He also said crypto was just one use case of blockchain technology and that a ban on digital assets would not affect innovation</li>
 </ul>
 
</div>



Cryptocurrencies are akin to Ponzi schemes and have no intrinsic value, according to India&#8217;s central bank deputy governor.



T. Rabi Sankar, who spoke during the Indian Banks&#8217; Association&#8217;s 17th annual Banking Technology Conference on Monday, said cryptocurrencies had no place in India&#8217;s economy and presented <a href="https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/CRYPTOCURRENCIESFBEA27DE561D427DB9DD5F25BE2CB8BB.PDF" target="_blank" rel="noreferrer noopener">significant risks</a> to financial stability.



<blockquote class="wp-block-quote">&#8220;All these factors lead to the conclusion that banning cryptocurrency is perhaps the most advisable choice open to India,&#8221; said Sankar. &#8220;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.&#8221;</blockquote>



The deputy governor said the argument put forth by enthusiasts including crypto&#8217;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 &#8220;basic scrutiny.&#8221; He also said he did not accept the argument that crypto advanced the development of blockchain technology.



&#8220;Even in case of private authentication through consensus mechanisms, accounts can be kept and rewards can be given in any legal tender currency,&#8221; said Sankar. &#8220;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.&#8221;



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&#8217;s comments come as no surprise, the seesawing rhetoric on crypto regulation from India&#8217;s policymakers has amounted to a dizzying stance. A patchwork of <a href="https://cms.blockworks.co/india-crypto-ban-about-payments-not-the-asset-class/" target="_blank" rel="noreferrer noopener">ad-hoc laws</a> has, at times, allowed private cryptos to function as digital assets, while, at others, have <a href="https://economictimes.indiatimes.com/tech/technology/indias-crypto-law-will-allow-only-a-few-cryptocurrencies-government-says/articleshow/87873526.cms?from=mdr" target="_blank" rel="noreferrer noopener">outlawed</a> them.



The lack of a unified front on crypto has exposed fragmentation among the country&#8217;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 <a href="https://cms.blockworks.co/india-to-introduce-a-30-crypto-tax-push-out-cbdc-by-2022-23/" target="_blank" rel="noreferrer noopener">30% tax</a> on income received from crypto gains, raising hopes for crypto&#8217;s legitimacy as an asset class.



Last week, Sitharaman shut down expectations she was not doing &#8220;<a href="https://timesofindia.indiatimes.com/business/india-business/taxing-crypto-doesnt-mean-it-is-legalised-fm/articleshow/89514617.cms" target="_blank" rel="noreferrer noopener">anything to legalize it or ban it [crypto]</a>&#8221; 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 <a href="https://timesofindia.indiatimes.com/business/india-business/taxing-crypto-doesnt-mean-it-is-legalised-fm/articleshow/89514617.cms" target="_blank" rel="noreferrer noopener">inputs from consultation</a> were concluded and that taxing crypto now is the government&#8217;s &#8220;sovereign right.&#8221;



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