The central bank of India is concerned that digital currencies could impact the country’s financial stability. The governor of the Reserve Bank of India revealed recently that the bank has conveyed its concerns with the government. The renewed skepticism comes amid a rising crackdown by major banks on digital currency transactions.
Governor Shaktikanta Das told CNBC TV-18 that the RBI has “major concerns” regarding digital currencies. While he didn’t elaborate on the nature of concerns, the regulator has in the past cited money laundering as a key concern. The RBI had banned commercial banks from processing digital currency-related transactions in 2018. This ban stood for two years before the Supreme Court overturned it in 2020.
On the digital rupee, the governor revealed that the RBI was “very much in the game.” The watchdog is giving the CBDC its full attention, working on the underlying technology and procedural aspects. He, however, didn’t disclose when he expects the bank to launch the digital rupee.
The latest anti-Bitcoin stance comes at a time when commercial banks in India are clamping down on the industry. According to the Economic Times, top private and foreign lenders in India have started questioning their customers’ digital currency-related transactions. These include HSBC, Citibank, ICICI Bank, HDFC Bank and Axis Bank.
According to the outlet, customers have reported receiving notices this year when they make digital currency transactions. The banks ask them to clarify these transactions, usually by having to report physically to their branches. Failure to report to the bank puts their accounts at risk of suspension or seizure.
One such notice to an undisclosed customer states, “To comply with the regulatory guidelines, banks are advised to exercise due diligence by closely examining the transactions carried out in the account on an ongoing basis to caution users, holders and traders of virtual currencies including Bitcoins regarding risks.”
India has expressed its desire to emulate and hopefully one day catch up with its neighbor China on the CBDC front. In his latest interview, Governor Das revealed that the RBI hopes to take after the PBoC’s digital yuan initiative. However, this emulation is spreading to other areas besides the digital rupee. One of these is the digital currency crackdown which China is famous for. India is already working to completely ban digital currencies via an executive order, following in China’s footsteps.
In Nigeria, the central bank is taking a similar anti-Bitcoin stance. All that this has done is push Nigerians to peer-to-peer platforms where demand is soaring. Traders are now selling digital currencies at a huge premium as Nigerians clamor to get into the digital currencies world before it’s too late.