Private cryptocurrencies have no underlying, it is speculative activity which can trigger financial crisis: RBI Governor
Dec 26, 2022
New Delhi [India], December 27 : Reserve Bank of India Governor Shaktikanta Das has said cryptocurrencies should be "prohibited" and that if they are allowed to grow "next financial crisis" will come from private cryptocurrencies.
He said they have absolutely no underlying and it is a speculative activity.
"I still hold the view that it should be prohibited. Countries have been taking different views, but our view is that it should be prohibited. If you try to regulate it and allow it to grow, please mark my words, the next financial crisis will come from private cryptocurrencies," Das said, on being asked whether the cryptocurrency war was over.
Shaktikanta Das mentioned three key points of concern regarding cryptocurrencies.
"I would like to mention three points. One, the origin of the cryptocurrencies, the private cryptocurrencies is to bypass the system, to break the system. They do not believe in the central bank currency; they do not believe in the regulated financial world. They want to bypass and beat the system. Second, they have absolutely no underlying. Not only that, I am yet to hear any credible argument about what public good or what public purpose, it serves. There is still no clarity about it. Third, it is a 100 per cent speculative activity," Das said.
He made the comments at fireside chat of the Business Standard BFSI Insight Summit last week, whose excerpts were published on the RBI's website on Monday.
Das also said cryptocurrencies have certain inherent risks for macroeconomic and financial stability.
"We have been pointing it out and its developments over the last one year, including the latest episode that was built around the FTX. We do not need to say anything more about our stand. Time has proved that cryptocurrencies are worth what they are today," he added.
Explaining further, Das, quoting some estimates said the total value of cryptocurrencies was about USD 180 billion and has now come down to about USD 140 billion, which essentially means about USD 40 billion worth of value got wiped out.
Crypto assets are currently unregulated in India.
The Indian government does not register crypto exchanges and it maintains crypto assets, by definition, are borderless and require "international collaboration" to prevent regulatory arbitrage.
The government believes any legislation for regulation or for banning can be effective only with significant international collaboration on evaluating the risks and benefits and evolution of common taxonomy and standards.
