Private Cryptocurrencies’ Growth Can Bring Next Financial Crisis: RBI Governor
Reserve Bank Governor Shaktikanta Das on Wednesday warned that allowing private cryptocurrencies to grow can precipitate the next financial crisis.
Speaking at the BFSI Insight Summit in Mumbai, Das also said the government and the central bank have been working in a coordinated manner to tame inflation and the Centre is “equally serious” about curbing price rise.
On private cryptocurrencies like Bitcoin, Das reiterated the RBI’s demand for a complete ban, saying such instruments do not have any underlying value and are speculative in nature.
“It’s a 100 percent speculative activity, and I would still hold the view 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,” he said.
“Cryptocurrencies have huge inherent risks from macroeconomic and financial stability (perspective) and we have been pointing it out,” he added.
The RBI governor further said the developments over the last one year, which include the latest crash of cryptocurrency exchange FTX, which has been termed as one of the biggest financial frauds in the history of the US, illustrate the threat posed by such instruments.
“After all these, I don’t think we need to say anything more about our stand,” Das remarked, adding that private cryptocurrencies’ valuation has shrunk and there is no underlying value for the market-determined price.
On the central bank digital currency (CBDC), Das said such fiat digital money is the future and central bank efforts are not motivated by a fear of missing out on the action created by the private cryptocurrencies.
He said the Indian CBDC pilot is different from having a UPI wallet, and added that it has certain unique features like the ability to return the money in 24 hours as well.
Meanwhile, in remarks on inflation, Das said the RBI’s measures like rate hikes and liquidity actions have been complemented by government’s steps on the supply side.
“I must say that to check inflation, there has been a very coordinated approach between the central bank and the central government,” Das said.
“Government also is equally serious about controlling inflation… everyone is interested in bringing down inflation and I am sure the government also will be equally keen that inflation is brought down,” he added.
The governor also said this government’s last full Budget before the general election in 2024 will not have any bearing on the conduct of the monetary policy.
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