If private cryptocurrencies are allowed to proliferate, they will be the root of the next financial crisis, the governor of India’s central bank said on Wednesday.
Shaktikanta Das, governor of the Reserve Bank of India, stated at a gathering that “cryptocurrencies pose… significant inherent hazards for our macroeconomic and financial stability.” He used the most recent demise of FTX as an illustration.
Das called cryptocurrencies “speculative” and added that he believes they should be outlawed, saying his major worry is that they have no intrinsic worth.
Private bitcoin trades are wholly speculative activities, and I continue to believe that they should be outlawed. Because, if you try to control it and let it flourish, I beg you to take note: private cryptocurrencies will be the cause of the next financial disaster, according to Das.
Digital currencies like bitcoin are referred to as private cryptocurrencies.
Das’ remarks come as the government’s main bank works to roll out its own electronic version of the Indian rupee. On December 1, the Reserve Bank of India launched a pilot scheme for the retail use of the digital rupee in a few locations. The digital rupee can be used for transactions by some users through applications and mobile wallets.
A form of digital currency used by central banks is the digital rupee (CBDC). A lot of central banks are considering producing digital copies of their own money.
According to Das, CBDCs can speed up international money transfers and lessen the need for logistical tasks like note printing.
Globally speaking, China’s central bank has made the most progress in creating a CBDC. Since the end of 2020, Beijing has been testing the usage of its digital yuan in the real world and will make it more widely available this year.
This year, the regulation of digital currencies gained more attention as a result of the $1.3 trillion decline in the value of the cryptocurrency market and the high-profile failure of the FTX exchange.
China has virtually outlawed the trade of cryptocurrencies.
The Indian government is drafting cryptocurrency laws that could forbid some cryptocurrency-related behaviour while establishing a legal framework for the digital currency issued by the central bank.
Even though cryptocurrencies were a considerably smaller asset class, central banks frequently claimed that they did not pose a significant risk to the economy. However, a rising number of voices are raising concerns about the possible macroeconomic effects, especially if cryptocurrencies are left uncontrolled.
Cryptocurrencies may not be “integrated sufficiently” into the financial system to pose a “immediate systemic danger,” according to Jon Cunliffe, the Bank of England’s deputy governor for financial stability, who made this statement in July. He stated that he believes there would “increasingly become hazy lines” separating the regular financial system from the cryptocurrency industry.
In October, the U.S. Treasury Department stressed the need for regulation and warned that “crypto-asset operations could pose dangers to the stability of the U.S. financial system.”
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