"Serious Threat to All Countries" - RBI Governor on Cryptocurrencies
RBI Governor Shaktikanta Das reaffirmed the central bank's firm stance on cryptocurrency, highlighting its potential risks and drawing parallels to historical financial bubbles.
Reserve Bank of India's (RBI) Governor, Shaktikanta Das, recently reaffirmed the central bank's steadfast position on cryptocurrency, keeping the financial community engaged with his consistent and clear viewpoint. He emphasised the significant risks associated with its adoption. Governor Das's remarks, consistent with his previous statements, underscore the RBI's firm viewpoint on this matter. “The RBI's position on cryptocurrency remains unchanged. Travelling down that path will create huge risks. I don't think the world or emerging markets (EMs) can take a crypto mania like the Tulip mania," he stated, drawing a parallel to historical financial frenzies.
Governor Das has been consistently vocal about the perils of cryptocurrencies, labeling them a "serious threat to financial stability," especially for emerging markets. His concerns are rooted in the volatile nature of these digital assets.
A significant aspect of his discourse on this topic was highlighted during the recent Mint BFSI Summit. At this event, the Governor posed critical questions to the regulators of this burgeoning industry: "How will you regulate it, whom will you regulate, and what will you regulate?" These questions bring to light the complexities and uncertainties surrounding the regulation of cryptocurrencies. He also referenced a recent International Monetary Fund (IMF) paper, which suggested that countries may need to consider imposing additional restrictions on cryptocurrencies.
In another vein, Governor Das commended private entities for their role in making India a leader in the Unified Payments Interface (UPI) payment system. He acknowledged the fintech sector's growth while emphasizing the importance of sustainable expansion, aligning with his prudent approach to financial innovation.
Addressing the recent surge in fraudulent lending applications, Governor Das assured that the RBI is actively working with the government and relevant ministries to take appropriate measures against suspicious apps, demonstrating the RBI's commitment to maintaining the integrity of India's financial system.
Governor Das also discussed the challenges posed by the robustness of IT systems and cyber security threats to banks. He assured that efforts are underway to strengthen India's banking and overall financial systems against such threats.
A key highlight of his address was the central bank's plans for Central Bank Digital Currency (CBDC). “We are expanding wholesale CBDC and exploring the potential for programmable features in retail CBDC to enable senders to define specific end uses," he revealed, indicating the RBI's willingness to embrace digital innovations in a regulated and controlled manner.
Governor Das's comments, reflect the RBI's cautious yet progressive approach to financial technologies, particularly cryptocurrencies. His advocacy for sustainable growth in fintech and digital payments serves as a reminder of the need for robust regulatory frameworks to effectively navigate the complexities of the digital financial landscape.