Reserve Bank of India Governor Shaktikanta Das shared his views on the next financial crisis and forecasted that it will be because of private cryptocurrencies. The RBI Guv blamed private cryptos as they have no underlying value and pose risks for macroeconomic and financial stability.
“Cryptocurrency has certain huge inherent risks for our macroeconomic and financial stability, and we have been pointing it out,” Das said at the Business Standard BFSI Insight Summit.
The RBI Governor cited the example of bankrupt crypto exchange FTX whose former CEO Sam Bankman-Fried was arrested from his penthouse in the Bahamas last week. Bankman-Fried has been officially charged by the US authorities with defrauding equity investors.
“After looking at the latest episode of FTX. I don’t think so we need to say anymore,” the RBI governor said at the event. Private cryptos are unsafe, according to Das, because they “do not have any underline whatsoever” unlike any other asset, or any other product.
Private cryptocurrencies bypass the system to “break the system”, since they do not trust in the central bank’s currency or regulate the financial world. Secondly, cryptocurrencies have no underline and third, it is a 100 per cent speculative activity, Das pointed out.
He again stressed that cryptocurrencies should be banned because, “mark my words, the next financial crisis will come from private cryptocurrencies,” if they are allowed.
UPI and CBDC
Apart from the risk of private cryptos, the RBI governor also talked about the significance of digital currency and how UPI and CBDC are different. While UPI is a system, CBDC is a “currency”, Das explained. Another point that he made was that UPI involves the intermediation of banks unlike CBDC which is like currency notes.
Digital Rupee has an automated “sweep-in and sweep-out facility, that means in 24 hours, a user can put back the CBDC in their bank account if not used,” he said.
CBDC is also inexpensive, unlike printed notes which need huge logistics and costs to print them. Dubbing it as the “currency of the future”, Das shared that CBDC lets people make instant money transfers between two countries.
The central bank commenced the pilot project of Digital Rupee for the wholesale market on November 1 while it started the pilot in retail segment, known as digital Rupee-Retail (e₹-R), was launched on December 1.
