Investors aren’t the only ones paying more attention to cryptocurrency trading lately, as a span of wild market gyrations has increasingly put this budding asset class on the radar of central bankers in the US, Europe, China, India and more.
On the extreme end of this newfound intervention, Paytm Payments and other gateways in India have reportedly stopped allowing transactions on cryptocurrency exchanges in that country altogether. Paytm stopped facilitating those transactions where rupees would have flowed from (or into) Paytm Bank accounts to make crypto payments.
Nischal Shetty, founder and CEO of crypto startups WazirX, told the site that the gateways had stopped the activity after ICICI Bank refused to allow crypto-related payments.
As Reuters reported earlier in the month, India’s central bank has been “informally” telling financial institutions (FIs) that they should sever their relationships with cryptocurrency exchanges and crypto traders. That maneuver comes despite the Supreme Court ruling that the banks can indeed interact and service crypto players. The moves by the central bank come as the country, according to Reuters, is “crafting a law” to ban cryptos outright.
Whether laws materialize or not, the push by India’s central bank stands in lockstep with those of other central banks around the world. This week, too, China’s central bank said that digital currencies are not real and should not be used within financial services or markets.
And as PYMNTS reported, the China Internet Finance Association, the China Banking Association and the China Payment and Clearing Association said that “financial institutions, payment institutions and other member units must earnestly strengthen their social responsibilities. They must not use virtual currency to price products and services, underwrite insurance businesses related to virtual currencies or include virtual currencies in the scope of insurance liability, and must not directly or indirectly provide customers with other services.”
There seems to be no safe haven for cryptos here in the States, either. On Thursday (May 20), Federal Reserve Chair Jerome Powell said in a video message that cryptos may pose “potential risks to … users and to the broader financial system.” He said there must be more attention paid to regulation and to “private-sector payments innovators who are currently not within the traditional regulatory arrangements applied to banks, investment firms and other financial intermediaries … to date, cryptocurrencies have not served as a convenient way to make payments, given, among other factors, their swings in value.”
The Fed is studying central bank digital currencies (CBDCs), of course, and China is at the forefront of the major economies launching digital fiat. It’s not far-fetched to think that the major central banks – as evidenced by China, India and the U.S. – are tamping down the “Wild West” aspects of crypto trading and speculation, in part for their own ends.
Proponents of cryptos have stated that the allure of bitcoin and other offerings ties into the ability to sidestep traditional, centralized financial conduits. That would include banks, as well as central banks, which have a vested interest in maintaining the status quo, certainly when it comes to keeping order and oversight of monetary policy, reserves and the like. Getting banks on board with efforts to close off avenues for crypto to gain (more) mainstream acceptance with institutional investors and consumers could pave the way toward a smooth introduction of CBDCs, without much competition.
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