India's Central Bank RBI Says Crypto Is Prone to Fraud and Poses Immediate Risks

India’s central bank, the Reserve Bank of India (RBI), published its biannual Financial Stability Report (FSR) last week. The 144-page document includes a section on “private cryptocurrency risks.” The term “private” refers to all cryptocurrencies that are not issued by the RBI, including bitcoin and ether.The central bank wrote:The proliferation of private cryptocurrencies across the globe has sensitized regulators and governments to the associated risks.“Private cryptocurrencies pose immediate risks to customer protection and anti-money laundering (AML) / combating the financing of terrorism (CFT),” the RBI stressed.In addition, the central bank noted: “They are also prone to fraud and to extreme price volatility, given their highly speculative nature. Longer-term concerns relate to capital flow management, financial and macroeconomic stability, monetary policy transmission, and currency substitution.”The report also references the finding of the Financial Action Task Force (FATF) which states that “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 allow for reduced transparency and increased obfuscation of financial flows.” The RBI emphasized: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.