RBI Guv Has Major Cryptocurrency Concerns

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Shaktikanta Das, Governor of the Reserve Bank of India (RBI) expressed Thursday at an event hosted by The Indian Express and Financial Times that the central bank continues to have serious and overwhelming concerns about cryptocurrencies such as Bitcoin, PTI reported. This concern has been conveyed to the Government of India. However, Das said the final appeal on the matter was with the government and he had to decide what to do about it, according to the report. Das added that the RBI would like to have credible explanations and answers as to the value that such instruments (cryptocurrencies) can bring to the Indian economy.

It should be noted that cryptocurrencies are under regulatory oversight and have been for some time now, with the government still unsure whether to fully authorize them or not. This despite their obvious lack of regulation, their very complex mining processes and the price volatility that make them such an unstable financial instrument. For now, calls have been made to treat cryptocurrencies as a foreign asset according to the report.

One of the first countries to recognize Bitcoin as an official asset was El Salvador. The South American nation recognized the digital asset earlier this week on September 7, 2021. The country has decided to adopt crypto as legal tender. In the wake of this, the country has also seen waves of civil unrest following the correction of the currency’s value by 20% in a single day, according to reports.

Speaking at the event, Das said: We have communicated to the government our serious and overriding concerns about cryptocurrencies from a financial stability perspective. The government will make a decision.

“I think we need more credible answers as to whether in the future all private cryptocurrencies, what contribution this will make to the Indian economy in the future. I think we have to be convinced by more credible explanations and answers, he added.

The umbrella bank initially banned domestic lenders from facilitating cryptocurrency investors’ trade, but that was overturned after the Supreme Court overturned the order. It has been alleged that some banks have taken over these services. Earlier this year in March, Das said he had reason to believe the government shares the concerns reported by the RBI, according to the report.

At the same time, India has taken steps towards its own legally recognized form of digital rupee. Also known as the central bank digital currency, the RBI is preparing for a gradual introduction of the asset. Das had mentioned last month that the digital currency would be rolled out with trial programs by December. Unlike cryptocurrency, central bank digital currency will be regulated. More interestingly, it will not be an asset so to speak, but a digital reflection of the current monetary system. It will be exchangeable one by one against the Indian rupee.

Cryptocurrencies, on the other hand, can be viewed as commodities that have a fixed value, like gold or silver. This value will be uniform in all areas, regardless of the country in which it is traded, the only factor to be taken into account being the currency conversion rate that would represent this value. Das had mentioned that the RBI aimed to launch the central bank’s digital currency as a large-scale digital asset. The RBI had issued a note stating that the central bank’s digital currency and the interest it held as an asset were universal. However, few countries have even approached the pilot phase of launching such an enterprise.

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