NEW DELHI: Former RBI governor Raghuram Rajan on Wednesday said only a "handful" of the 6,000-odd cryptocurrencies in existence today might survive going forward.
Comparing the craze in cryptocurrency with that of the tulip mania in the Netherlands in the 17th century, Rajan said people hold cryptocurrencies for two reasons -- store of value and an asset which might appreciate; and for use in payments.
"Do we really need 6,000 cryptocurrencies to do payments? One or two, may be a handful, that is going to survive to be used for payments even if the technology is so useful that it is a substitute for cash and currency."
"That would suggest that most cryptos are unlikely to survive with high values going forward," Rajan told CNBC-TV18.
The remarks come a day after the government listed for introduction in Parliament a bill to ban all private cryptocurrencies, with some exceptions.
'The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021', to be introduced in the winter session of Parliament beginning November 29, seeks to "create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India.
The bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses".
Rajan further said cryptos may pose the same problem as unregulated chit funds which take money from people and go bust.
"If things have value only because they will have more value down the line, if that's the only reason, then that's what we call a bubble," Rajan pointed out.
Around 54 per cent people covered in a pan-India survey did not favour legalising cryptocurrencies in the country and instead pitched for treating them as digital assets held overseas, digital community platform LocalCircles said in a report.
LocalCircles said the study received more than 56,000 responses from people residing in 342 districts of the country, while the number of responses to individual questions differed.
In response to a question on how India should handle cryptocurrencies from a regulatory standpoint, 8,717 responses were received.
"26 per cent said it should legalise these currencies and tax them in India. A whopping 54 per cent, however, said it should not legalise but tax it like a digital asset held in a foreign country, and 20 per cent did not have an opinion.
"Overall, more than twice as many people want cryptocurrencies to not be legalised in India from a regulatory standpoint," the report said.
According to the survey, 87 per cent respondents said Indian families do not have anyone trading or investing in cryptocurrencies.
A question around the views on cryptocurrency advertisements received 9,942 responses, in which 74 per cent said these ads were not highlighting the risks involved in an effective manner.
In the recent T-20 cricket World Cup, one in three advertisements were of cryptocurrencies, with platforms and exchanges trying to attract viewers, the report said.
"LocalCircles will be sharing the findings of this study with the senior leadership of government of India, the RBI leadership and all Members of Parliament such that public feedback on cryptocurrencies can be given the due consideration as laws related to it are finalised," LocalCircles founder Sachin Taparia said.
The government on Tuesday listed for introduction in Parliament a bill to ban all private cryptocurrencies, with some exceptions.
'The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021', to be introduced in the winter session of Parliament beginning November 29, seeks to "create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India."
The bill also seeks to prohibit all private cryptocurrencies in India.
However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.