RBI Governor: Cryptocurrencies are clear danger, says RBI governor Shaktikanta Das | India Business News
In the foreword of RBI’s latest financial stability report released on Thursday, Das wrote that cryptocurrencies are a speculation under a sophisticated name.
“While technology has supported the reach of the financial sector and its benefits must be fully harnessed, its potential to disrupt financial stability has to be guarded against,” he wrote.
The RBI governor also cautioned against rising cyber risks as a result of increasing digitisation of financial systems.
This is not the first time that Das has voiced concern on the risk involved with crypto investments. Das has often voiced caution on investing in cryptocurrencies.
Announcing the bi-monthly monetary policy outcome in February, Das had cautioned investors by invoking the 17th century ‘tulip mania’ — which is widely considered to be the first financial bubble. He had said that investors must remember that cryptocurrencies have no underlying, not even a tulip.
In addition, the report noted that risks from crypto assets to financial stability appear to be currently limited as the overall size is small (0.4 per cent of global financial assets) and their interconnectedness with the traditional financial system is restricted.
However, it warned that the associated risks are likely to grow as these assets and the ecosystem supporting their growth are evolving.
In particular, the report highlighted the need for closely monitoring stablecoins.
“The risks from stablecoins that claim to maintain a stable value against existing fiat currencies require close monitoring, in particular – they are akin to money market funds and face similar redemption risks and investor runs because they are backed by assets that can lose value or become illiquid in times of market stress,” it added.
Citing an example, the report said historically private currencies have resulted in instability over time and in the current context, result in ‘dollarisation’, as they create parallel currency system(s), which can undermine sovereign control over money supply, interest rates and macroeconomic stability.
Furthermore, the financial stability report said that cryptos may impair financial stability since they are not an instrument of debt or a financial asset and do not have any intrinsic value.
The central bank has always maintained a strong stance against private digital currencies. It had banned the banking system from aiding such trades, which was struck down by the Supreme Court in 2020.
In February earlier this year, Das had said it is his “duty” to caution investors, and told them to keep in mind that they are investing at their own risk.
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