The Governor of the Reserve Bank of India, Shaktikanta Das, has issued a warning that the next financial crisis could be caused by cryptocurrency if it is both regulated and allowed to expand.
When asked about the cryptocurrency industry at a recent conference, Shaktikanta Das, the governor of the Reserve Bank of India (RBI), did not hold back his comments. He stated unequivocally that “private” cryptocurrencies will be the cause of the next financial disaster.
Das made this claim while he was a speaker at the Business Standard BFSI Insight Summit on December 21. He stated that private cryptocurrencies, which are cryptocurrencies that are not issued by banks or governments, are not backed by anything and are solely instruments for speculation because there is no foundation for them.
They have no worth that lies under the surface. They provide enormous inherent dangers to the stability of our macroeconomic and financial systems. According to what he has said, “I have not yet seen any reasonable case regarding what public good or what public purpose it serves.”
Das went on to propose that a full-scale ban on cryptocurrencies in India would be the best strategy moving ahead, adding his voice to the chorus of support for such a measure:
“It [the private trade of cryptocurrencies] is an activity that is one hundred percent speculative, and I would still retain the position that it should be forbidden… Because, mark my words, the next financial disaster will come from private cryptocurrencies if it is allowed to expand, if you try to regulate it and allow it to grow.
In order to illustrate an example of this type of risk, the head of the RBI referred to the recent implosion of the FTX market, which was led by Sam Bankman Fried, who had just been extradited.
He stated, “I don’t think we need to say anything more about our stand after the developments that have taken place over the course of the past year, particularly the most recent episode revolving around FTX.”
These statements indicate yet another instance in which a prominent figure in politics or finance has blamed the crypto sector for the collapse of FTX. Many senators in the United States, in particular, have taken the opportunity during the past few weeks to criticise digital assets.
Das, of course, spoke in much more favourable terms of central bank digital currencies and emphasised that the RBI is aggressively striving to get its digital rupee off the ground. Das’s comments were in contrast to those of others who have spoken about central bank digital currencies.
“You will see in the days to come more and more central banks will embrace digital currencies, and India has been at the vanguard of the digital transformation in this century,” he added. “You will see in the days to come more and more central banks will embrace digital currencies.”
The Reserve Bank of India has traditionally held a negative attitude about cryptocurrencies and has on multiple occasions cast doubt on their worth. The most recent statements made by Das indicate that the mood is only getting worse, especially considering that the bank had previously put the industry at the very bottom of its list of systemic risks as recently as June.