Reserve Bank of India (RBI) governor Shaktikanta Das has always been a vocal opponent of cryptocurrencies, speaking out in public about the threat it poses to India’s financial stability on several occasions.
The central bank chief continues to maintain a hard stance against the crypto sector, going on to say that if private cryptocurrencies are allowed to grow, it will be the cause of the next major financial crisis. This comes weeks after the RBI introduced its own central bank digital currency (CBDC) the e₹.
Speaking at the BFSI Insight Summit 2022, Das said that cryptocurrencies do not have any underlying value, and that it poses “huge inherent risks” to the financial stability of India
Change in value of any so-called product is the function of the market, but unlike any other asset, our main concern about crypto is that it doesn’t have any underlying [value] whatsoever,” Das said. “As a term, cryptocurrency is a fashionable way of describing what is otherwise a 100 percent speculative activity.”
Das also noted that the latest FTX meltdown has caused a wipeout of nearly $40 billion from the market. “After the episode of FTX, I don’t think we need to say anything more.”
Das said that private cryptocurrencies were created to bypass the system, to find a way around central bank currencies. “There’s no credible argument about what public good it does, or what public purpose it serves,” noted Das as he said that private cryptocurrencies are a completely speculative activity. “I still hold the view it should be prohibited.”If you allow it to grow, mark my words, the next financial crisis will come from private cryptocurrencies,” Das said.
Cryptocurrencies are yet unregulated in India and are clubbed under virtual digital assets (VDAs) in the country, attracting taxation of 30 percent on all gains as well as an additional TDS of 1 percent.As mentioned earlier, the RBI recently introduced two formats of CBDCs — e₹-W (for wholesale sector) and e₹-R (for retail sector). Unlike cryptocurrencies, the value of the digital rupee will be the same as the fiat rupee and won’t depreciate in time in relation to the national currency.
When asked about the advantages of the e₹, Das said that the digital rupee will help ease logistics, by eliminating cost of printing notes and other such elements. Das also noted that the digital.
The RBI chief said that the digital rupee also offers an automatic sweep-in and sweep-out facility, which enables users to easily withdraw e₹ and also drop it back in your bank account as and when needed.
Das said that the digital rupee will eliminate banks as intermediaries in digital transactions, as seen in the case of the UPI mode of payment. He added that CBDC will also help in transactions between nations as it will enable instant remittance.