Cryptocurrencies: The Crypto World Claims Digital Currency Is The Panacea But The Truth Somewhere In Between: CEA KV Subramanian

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NEW DELHI: Chief Economic Advisor (CEA) KV Subramanian says a distinction needs to be made between crypto as an asset and crypto as a currency.

Over time, only currencies issued by sovereigns have acquired legitimacy. What gives the currency credibility is the fact that it is backed by a sovereign, he said in an interview with ET NOW.

An important aspect that must be taken into account when talking about a virtual currency is that there is nothing to support the price of a crypto. “For example, for a stock, that company’s cash flow is actually the backing of that stock. If you take gold, you know it’s actually an asset unlike crypto. There is nothing that supports crypto and therefore the intrinsic volatility can be very high which also impacts the attractiveness of crypto as an asset itself, ”Subramanian said. .

Historically, he said, assets were those that actually had more stable values ​​and something that had an underlying. “Anytime you take a financial innovation, it’s a zero-sum game. In other words, it has no benefit to the real sector or perhaps a minimal benefit to the real sector. And, therefore, it must be negotiated with great caution. Tomorrow, if you and I decide to sit down and play cards together, what could happen is that the money changes hands. Maybe you could get richer at my expense. But, collectively, we will both hold the same amount of money that we started with, ”CEA said.

Taking the card game as an example, he said the money would have changed hands but that money would not necessarily go to the real sector. “The blockchain does, in fact, have the potential, even without the crypto itself, to actually benefit the real economy. It happened even before the fascination with crypto aroused so much interest,” he said. he declared.

“A distinction must be made between crypto as an asset and as a currency”: CEA KV Subramanian

“A distinction must be made between crypto as an asset and as a currency” Here are CEA KV Subramanian’s views on cryptocurrency

The government reportedly intends to regulate cryptocurrency by categorizing it as an asset, instead of a currency.

The CEA to the government said, “Those in the cryptocurrency world claim that crypto is a panacea. The truth is, it falls somewhere in between.”

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