The Deputy Governor of India's central bank T. Rabi Sankar has called for an outright ban on cryptocurrencies in the country, saying that they are akin to Ponzi schemes and "may even be worse".
Addressing an event organised by the Indian Banks Association, Sankar on Monday said that cryptocurrency "is underpinned by a philosophy to evade government controls", claiming that it was invented specifically to bypass the regulated financial system.
"These should be reasons enough to treat them with caution",Sankar said. "We have also seen that cryptocurrencies are not amenable to definition as a currency, asset, or commodity; they have no underlying cash flows, they have no intrinsic value; that they are akin to Ponzi Schemes, and may even be worse".
He further said that banning cryptocurrency is perhaps the most advisable choice open to India and there are strong reasons to keep cryptocurrencies away from the formal financial system.
A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from later investors. It has little or no legitimate earnings.
The deputy chief of the Reserve Bank of India (RBI) also said that digital currencies can wreck the currency system, monetary authority, the banking system, and in general, the government's ability to control the economy.
The statement from Shankar came after RBI Governor Shaktikanta Das reiterated his concerns over cryptocurrencies.
While addressing a press conference after the latest RBI monetary policy review last week, Das had cautioned investors investing in cryptocurrencies.
"I think it is my duty to tell investors that what they are investing in cryptocurrencies, they should keep in mind that they are investing at their own risk. They should keep in mind that these cryptocurrencies have no underlying (asset). Not even a tulip", the RBI chief said.
The RBI has been raising concerns over digital currencies. In April 2018, it banned banks from supporting crypto-transactions after cases of fraud involving virtual currencies were reported. However, the Supreme Court of India struck down the ban in March 2020.
The RBI, however, has not yet granted legal tender status to any cryptocurrency.