Reserve Bank of India (RBI) Governor Shaktikanta Das has once again warned about the threats that cryptocurrencies pose to global financial stability, particularly for emerging market economies.
Speaking at the Business Standard BFSI Insight Summit 2023 in Mumbai, Das stressed the importance of dealing with cryptocurrencies responsibly.
RBI Governor Highlights Risks Associated With Crypto
Das highlighted the potential risks associated with cryptocurrencies. He referenced the International Monetary Fund (IMF) and Financial Stability Board (FSB) synthesis paper, which underlines the need for country-specific regulations, especially in emerging markets.
This paper provides guidelines and a roadmap for crypto regulation.
Governor Das expressed his concerns about the challenges of regulating cryptocurrencies and raised fundamental questions about the nature of these digital assets.
He pointed out the lack of a clear, universally accepted definition of what cryptocurrencies represent. Das questioned whether cryptocurrencies should be classified as products, financial assets, or something entirely different due to their intangible nature.
India Promotes its CBDC to Ward off Competition from Crypto
India’s central bank’s governor also emphasized the need to understand the broader purpose of cryptocurrencies in comparison to Central Bank Digital Currencies (CBDCs). Das sought a compelling explanation for what cryptocurrencies offer in terms of international and domestic transactions that CBDCs cannot fulfill.
Governor Das also raised the crucial issue of private cryptocurrencies coexisting with sovereign fiat currencies issued by central banks. He questioned whether governments and central banks worldwide are comfortable with this new currency system.
The G20 finance ministers and central bank governors had previously adopted the roadmap on crypto assets proposed in the IMF-FSB synthesis paper. This roadmap calls for swift and coordinated implementation, reflecting a global effort to address cryptocurrency-related risks.
Das emphasized that while he understands the concerns of crypto businesses, the RBI is focused on maintaining macroeconomic stability. He clarified that the regulator’s intention is not to stifle innovation but to ensure that innovation aligns with the broader public interest and serves a purpose beneficial to society.
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