Pvt cryptocurrencies pose risks to customer protection: RBI report

THEY ARE ALSO PRONE TO FRAUDS TO EXTREME PRICE VOLATILITY, GIVEN THE SPECULATIVE NATURE, IT SAID

MUMBAI: Private cryptocurrencies pose immediate risks to customer protection and are prone to frauds and extreme price volatility, given their highly speculative nature, the Reserve Bank of India (RBI) said in its financial stability report released on Wednesday.

The latest report noted that the proliferation of private cryptocurrencies across the globe has sensitised regulators and governments to the associated risks.

“Private cryptocurrencies pose immediate risks to customer protection and antimoney laundering (Aml)/combating the financing of terrorism (CFT). They are also prone to frauds and to extreme price volatility, given their highly speculative nature,” it said.

Longer-term concerns relate to capital flow management, financial and macro-economic stability, monetary policy transmission and currency substitution, it said.

According to the Financial Action Task Force (FATF), the virtual asset ecosystem has seen the rise of Anonymity-enhanced Cryptocurrencies (AECS), mixers and tumblers, decentralised platforms and exchanges, privacy wallets, and other types of products and services that enable or allow for reduced transparency and increased obfuscation of financial flows.

New illicit financing typologies continue to emerge, including the increasing use of virtualto-virtual layering schemes that attempt to further muddy transactions in a comparatively easy, cheap and anonymous manner, the report said.