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Private cryptocurrencies will be the cause of the next global financial crisis if they are not prohibited, RBI Governor Shaktikanta Das said on Wednesday.
“Our view is that it should be prohibited because if you try to regulate it and allow it to grow, then please mark my words, the next financial crisis will come from private cryptocurrencies,” Das said at the BFSI Insight Summit organised by a financial publication.
Taking a strong stand on the privately-managed virtual currency, Das reiterated that RBI “firmly believes” that cryptocurrencies “have absolutely no underlying”, and pose huge inherent risks to macroeconomic and financial stability. “The term private cryptocurrencies is a fashionable way of describing what is otherwise a 100 per cent speculative activity,” he said.
He added that developments in the cryptocurrency sector over the last year, including the recent collapse of the FTX exchange, have proved that RBI does not need to justify its stand anymore as “time has proved cryptocurrencies are worth what they are today”.
Three points
Das highlighted three points as to why the central bank is uncomfortable with cryptocurrencies — the origin of the asset class is rooted in bypassing and breaking or beating the regulated financial system, they have no underlying assets, and that they operate on speculative activity.
“I am yet to hear any credible argument about what public good or purpose it serves, there is still no clarity about it,” he said.
On the other hand, the CBDC (central bank digital currency) is a regulated currency and will ensure cash-like anonymity, Das said when asked about the introduction of e-rupee.
CBDC is the currency of the future, Das said, adding that a digital currency eliminates the logistical and operational issues involved in manufacturing or printing paper currency, thus reducing costs and making the process “simpler and much faster”.
It will also enable instant international money transfers and remittances through the use of CBDCs of two countries, he said, adding this is how the digital world is going to evolve and take shape in the years to come.
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