Continuing its critical stance against cryptocurrencies, the Reserve Bank of India (RBI) has said that these pose immediate risks to customer protection, anti-money laundering and combating terrorism financing.

In its financial stability report, the RBI noted that private cryptocurrencies are "prone to frauds and to extreme price volatility, given their highly speculative nature. Longer-term concerns relate to capital flow management, financial and macro-economic stability, monetary policy transmission and currency substitution".

With the government being in the process of framing a national law to regulate the cryptocurrency market, the RBI’s views expressed in the report assume significance. India is in the midst of a debate on whether private cryptocurrencies should be banned or not.

The RBI has kept highlighting the deeper macroeconomic concerns posed by the unregulated private cryptocurrency market in India. However, the central bank is open to the idea of introducing a Central Bank Digital Currency (CBDC).

Also, the proliferation of private cryptocurrencies across the globe has sensitised regulators and governments to the associated risks, the report said.

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