[heading]The Reserve Bank of India Wants An End to Virtual Currency[/heading]
Yet another government has shown its cards: The Indian government has concerns over the rise of virtual currencies in recent memory.
The Reserve Bank of India expressed concern over the rise of virtual currencies in a new report. The report relies on the former Director General of Police and security adviser to the Reserve Bank of India claiming that “crypto currencies are becoming a major avenue for money laundering.”
The RBI stated in its June 2013 financial stability report:
Globally, the use of online and mobile technologies is driving the proliferation of virtual banks, virtual currencies (Box 3.4) and provision of banking and payment services by unlicensed entities. While leveraging on technology has resulted in many benefits, especially, in extending the reach of the financial services, these developments pose challenges in the form of regulatory, legal and operational risks.
The report delves into the territory of defining what virtually currency is. It also makes clear that regulators are studying the impact of online payment options and virtual currencies to determine potential risks associated with them.
The India reserve bank declined telecom companies the option to lunch mobile wallets on their own. The telcos, however, could partner with banks to provide mobile wallet services. This was a move to keep the regulatory environment under control.
The desire for virtual currency regulation comes as the rupee is headed for its biggest quarterly loss since 1992 due to the nation’s balance of payments and the impending end of $85 billion in monthly bond purchases by the Federal Reserve.
The rupee hits an all-time low of 60.765 per dollar on June 26 in the wake of Ben Bernanke saying quantitative easing may end in 2014. Global funds cut rupee debt holdings by $5.3 billion in June.
This month alone, the rupee has been devalued 5.6 percent, the worst of 78 global currencies tracked by Bloomberg that month.
India’s reaction, amid currency crisis, paints a picture of how nation-states will likely react as their currencies begin devaluing and inflating in the coming years. Expect that, once Bernanke does cease printing, lots of pressure will be turned to the virtual currency complex. For now, the Indian government has taken a more US-style approach than most nations, in particular Canada.