The latest report states that the proliferation of private cryptocurrencies around the world has made regulators and governments vulnerable to the associated risks.
The Reserve Bank of India (RBI) in its Financial Stability Report released on Wednesday said that private cryptocurrencies pose an immediate risk to the safety of customers and are prone to fraud and extreme price volatility.
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The latest report states that the proliferation of private cryptocurrencies around the world has made regulators and governments vulnerable to the associated risks.
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“Private cryptocurrencies pose immediate risks to protect customers and combat anti-money laundering (AML)/financing of terrorism (CFT). They are also prone to fraud and extreme price volatility, given their highly speculative nature. happened,” it said.
Long-term concerns relate to capital flow management, financial and macro-economic stability, monetary policy transmission and currency substitution.
According to the Financial Action Task Force (FATF), the virtual asset ecosystem has seen the rise of anonymity-enhanced cryptocurrencies (AECs), mixers and tumblers, decentralized platforms and exchanges, privacy wallets, and other types of products and services that enable or enable the use of digital assets. Allow for less transparency and increased financial flows.
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New illicit financing types are emerging, including the increasing use of virtual-to-virtual layering schemes, which attempt to process sloppy transactions in a comparatively easy, cheap and anonymous way, the report said.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was included in the Lok Sabha Bulletin-Part II, to be introduced in the winter session of Parliament that ended on 22 December.
According to the bulletin, the bill, which could not be introduced, sought to create a facilitating framework for the creation of an official digital currency to be issued by the RBI.
It also sought to ban all private cryptocurrencies in India. However, it allows some exceptions to promote the cryptocurrency and the technology underlying its use.
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The total market capitalization of the top 100 cryptocurrencies has reached $2.8 trillion.
In EMEs that are subject to capital controls, the report said, free access to crypto assets for residents could undermine their capital regulation framework.
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