Next financial crisis could come from cryptocurrency if it grows: Governor, RBI

AMN / WEB DESK

The Governor of Reserve Bank of India Shaktikanta Das has warned the public against crypto trading, stating that it poses an inherent risk to the country’s macroeconomic and financial stability.

Speaking at an event in Mumbai this morning, the RBI Governor said, the next financial crisis could come from cryptocurrency if it grows. The RBI Governor highlighted the high volatility of these assets, stating that cryptocurrency is now worth $140 billion, a loss of around $40 billion this year.

He also mentioned that the majority of central bankers across the world have been wary of cryptocurrencies. The RBI Governor said, there are three main concerns with cryptocurrency. He elaborated stating that firstly, private crypto owes its origin to ‘breaking the system’ and they do not believe in the regulated financial world. Secondly, he said that cryptocurrency has absolutely no underlying basis and there is also no clarity on what public good or purpose they serve. Thirdly, it’s a 100 percent speculative activity hence making it a risky asset, he added.

RBI Governor also spoke about RBI’s first pilot for retail e-rupee, its version of the Central Bank Digital Currency (CBDC), which was launched on the 1st of December. The pilot will cover select locations in a closed user group comprising participating customers and merchants.

The Governor said that CBDC is the currency of the future and further painted out the benefits explaining that the Unified Payments Interface involves intermediation of banks whereas CBDC is like currency notes with that CBDC also has an automatic sweep in and out facility. He further added that logistics for CBDCs will be much simpler and this will propel India to the forefront of digital currency in this century.