Shaktikanta Das, Governor of the Reserve Bank of India, has once again warned against the dangers of cryptocurrencies. Das described cryptocurrencies as a clear threat, claiming that such commodities, the value of which are derived solely from make-believe elements with no underpinning utility, are merely the outcome of speculation.
The Governor’s remarks were made in tandem with the central bank’s 25th ‘Financial Stability Report’ (FSR), which stressed the threat of cryptocurrencies and the need for national authorities to take decisive action.
At the start of the RBI’s ‘Financial Stability Report’ for June 2022, Das mentioned that, as the financial system becomes increasingly digitalized, cyber risks requiring special attention rise as well. He claims that the economy is becoming more susceptible to global spillovers and geopolitical concerns.
Previously, the RBI repeatedly underlined the risks of cryptocurrencies, even banning them in the nation, until the measure was reversed by the Supreme Court. The Governor of RBI has often expressed his concerns about the threats posed to financial stability.
According to Das, the hype around cryptocurrency is comparable to the tulip mania bubble. The concern is that people will use all of their credit cards and personal loans to invest in cryptocurrencie; then, if those values fall rapidly, the banks become burdened with non-performing assets during a collapse.
Shaktikanta Das stated that there have been many prior warnings about cryptocurrency, and that the current situation in the crypto market was a foreseen risk. Regulatory clarity within the cryptocurrency sector has yet to truly surface. He claims the public questions what would have happened to digital currencies if they had previously regulated them.
Reaction from the Indian Government
The Indian government is currently working to conclude a consultation paper on cryptocurrencies, with input from numerous parties and organizations, including the World Bank and the IMF.
Meanwhile, the country’s central bank plans to launch the ‘Digital Rupee,‘ a digital currency based on blockchain and other technologies, in 2022-23.
According to Shaktikanta, the introduction of the CBDC will provide a “significant boost to the digital economy,” adding that the “digital currency will also result in a more efficient and cost-effective currency management system.”
The Current State of Bitcoin
The value of Bitcoin, the world’s leading cryptocurrency token, dropped to $19,379.50 this week, a far cry from its all-time high of $68,990.90. The coin is down 34.94% in the last month, and over 60% year to date. Since setting its record market capitalization of $3 trillion, the cryptocurrency market has lost over two-thirds of its market cap, which now sits at just under $1 trillion.