Cryptocurrency is based largely on the principle of independence from government and similar institutional restrictions. It is available worldwide and has been gaining popularity recently as an avenue for investment.
This would thus explain why it would be perceived as a threat to the mainstream economies controlled by governments. It is a new and unusual financial sector that is almost impossible to regulate.
The Reserve Bank of India, set out to establish if cryptocurrency is a threat to the Indian economy. In conjunction with the Financial Stability Board of which the World Bank is a membe. India’s chief bank has issued their own national report on cryptocurrency.
The report declares that cryptocurrency is not a threat to the Indian economy. It nevertheless points to emerging issues that require consumer caution. These include price bubbles.
Price bubbles put consumers at risk seeing as its a circumstance where a crypto asset would be trading at a higher price than it’s true value. This is usually caused by the forces of supply and demand. A bubble could easily be burst by those forces and causing prices to fall dramatically.Such an event would leave crypto asset holders with massive losses as they would trade their assets at much lower prices.
No Regulations to be Imposed Yet
All these factors taken into consideration, bank has not taken any measures to impose regulation on the sector. It has only barred financial institutions from providing financial services to the crypto economy.
This could be attributed to the fact that the law does not give them the authority to transact in any other currencies other than the official local and foreign currencies issued by Central Banks worldwide.
However, this condition has been challenged in court. The verdict when delivered will decide whether financial institutions in India will be able to participate in the growing crypto economy.