MUMBAI: Expressing concerns about cryptocurrencies, Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday said these virtual assets could cause the next financial crisis and should be prohibited.
“Our view is it should be prohibited because if it is allowed to grow... the next financial crisis will come from private cryptocurrencies,” said the Governor speaking at an event held in Mumbai. Highlighting the volatility and uncertainty in cryptocurrencies, he said the value of virtual currencies has come down to $140 billion and $40 billion was wiped out.
“Cryptocurrency has certain huge inherent risks for our macroeconomic and financial stability and we have been pointing it out for some time. After looking at the latest episode of FTX. I don’t think we need to say this anymore,” he added.
He said private cryptos owe their origin to ‘breaking the system’ and they don’t believe in the regulated financial world. Cryptocurrency has absolutely no underlying basis and there is also no clarity on what public good or purpose they serve, he said. About containing prices, the Governor said there is coordination between the central government and the RBI to control inflation.
“I must say that to check inflation, there has been a very coordinated approach between the central bank and the central government,” he added. He said the RBI's actions included one on the rates, the stance of the monetary policy and liquidity measures, while the government undertook several supply-side measures like cutting down taxes on petrol or diesel and reducing duties on imported food items.
The Governor underlined the advantages of Central Bank Digital Currency (CBDC) and termed it the currency of the future. “The world is becoming more and more digital in days to come, more and more central banks will embrace digital currency,” he said. He said the Unified Payments Interface (UPI) involves intermediation of banks whereas CBDC is like currency notes with an automatic sweep in and out facility.
“24 hours, you can draw CBDC. And if you are carrying excess CBDC, you can deposit it in the bank,” Das said.