Reserve Bank Deputy Governor T Rabi Sankar made a strong case for banning cryptocurrencies on Monday, comparing them to speculative or gambling contracts that work like a Ponzi scheme, or even worse.
“The fundamental risks of cryptocurrencies are twofold: they are intended to be private currencies, and they are designed to avoid government control with respect to financial integrity standards such as KYC, AML/CFT, and so on. Cryptocurrencies were created specifically to bypass the regulated financial system. These should be sufficient reasons to keep them out of the conventional financial system,” the Deputy Governor said at the Indian Banks Association’s 17th Annual Banking Technology Conference.
“Cryptocurrencies are similar to, and possibly worse than, speculative or gambling contracts that operate like a Ponzi scheme. Even Ponzi schemes invest in income-generating assets. Cryptocurrencies do not fit the definition of a currency because they do not have an issuer, are not a debt instrument or a commodity, and have no intrinsic value. Commodities are tangible and have utility; cryptocurrencies have neither. Cryptocurrencies are neither any person’s liability nor do they have any underlying cash flows. By definition, they are not financial assets,” he added.
The proponents have improvised to call cryptocurrencies ‘digital assets.’ Even that is doubtful as cryptocurrencies do not have any underlying use, Rabi Sankar opined. “That basically leads to the conclusion that it is an electronic code (with no practical use). Notwithstanding their current valuations, if a threshold number of people decide to opt out, the entire values can easily collapse to nothing,” he noted.
