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Shaktikanta Das: Next financial crisis will come from private cryptocurrencies: RBI Governor Shaktikanta Das | India Business News


NEW DELHI: Reserve Bank of India (RBI) chief Shaktikanta Das has once again warned about investment in cryptocurrencies.
At an event this morning, the RBI chief said that the next financial crisis will come from private cryptocurrencies.
“It is 100% speculative activity and I would still hold the view that it should be prohibited because if it is allowed to grow, please mark my words the next financial crisis will come from private cryptocurrencies,” Das said.
He also highlighted that if central banks fail to regulate cryptocurrencies then there is huge inherent risk for our macroeconomic and financial stability.
“The private crypto owe their origin to bypass the system or to break the system. They dont believe in the central bank currency, regulated financial world and all they want is to bypass and beat the system,” Das said.
Citing the example of latest crash of cryptocurrency exchange FTX, which is termed as one of the biggest financial frauds in the history of the US, Das said that it illustrates the threat posed by such instruments.
The sudden collapse of FTX — a cryptocurrency exchange worth $32 billion before it filed for bankruptcy last month — and US fraud charges against its one-time billionaire founder Sam Bankman-Fried has intensified scrutiny of the sector.
“After all these, I don’t think we need to say anything more about our stand,” Das said, adding that private cryptocurrencies’ valuation has shrunk from $190 billion to $140 billion and there is no underlying value for the market-determined price.
The RBI chief also questioned the very basis of private cryptocurrencies. “They have absolutely no underlying assets,” he said.
“I am yet to hear any credible argument about what public good purpose they serve. It’s a hundred per cent speculative activity,” he added.
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Crypto regulation in India
This is not the first time that the central bank governor has voiced his concern over the risks posed by cryptocurrencies.
Ever since its entry into the domestic market nearly a decade ago, cryptos have been under the scrutiny of RBI and the government. A rise in fraudulent transactions led to the RBI imposing a ban on them in 2018.
Two years later, the Supreme Court lifted the restrictions and the market surged, backed by burgeoning local trading platforms and glitzy celebrity endorsements.
However, the introduction of a 30% tax on profits from trading “private currencies” this year has resulted in trading volumes shrinking to a tenth of their previous size.
A sharp fall in the prices of leading tokens like bitcoin — dubbed a “crypto winter” — has wiped out more than $2 trillion from their global market value since its peak of $3 trillion in November 2021, further spooking traders.
Earlier this year, the RBI introduced its own digital rupee based on blockchain technology, intended to bring down the costs of commercial transactions as the Indian economy becomes less reliant on paper currency.
Last month, Prime Minister Narendra Modi also called for increased regulation of private currencies to stamp out terror funding.
PM Modi also said last year that bitcoin presented a risk to younger generations and could “spoil our youth” if it ended up “in the wrong hands”.
(With inputs from agencies)

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