RBI Governor Shaktikanta Das on Wednesday said the biggest concern with the private cryptocurrencies like Bitcoin and Ethereum is that they do not have any underlying value, and if they are allowed to grow, the next financial crisis will come from them. He also said these assets should be prohibited.
Speaking at the BFSI Insight Summit 2022 hosted by Business Standard, he said, “Cryptocurrencies owe their origin to bypass the system, break the system, and they don’t believe in regulations… I am yet to hear any good argument about what good public purpose it serves. It’s a 100 per cent speculative activity and should be prohibited. If you allow it to grow, the next financial crisis will come from private cryptocurrencies.”
Das has in the past also come down heavily upon cryptocurrencies. He earlier also said these digital assets can create a lot of financial instability in terms of the ability of the central bank to determine monetary policy.
On asked how central bank digital currency (CBDC), or digital rupee, is different from current digital payment systems, Das on Wednesday said UPI is a payment system while CBDC is a currency itself. He also said UPI involves the intermediation of banks while CBDC is like a paper currency that gets settled between those doing transactions, and there is an automatic sweep-in and sweep-out facility. Digital rupee will also save costs on printing paper currencies. There will be instant transfer.
Earlier this month, the RBI launched India’s digital currency on a pilot basis. CBDC is a digital form of fiat currency issued by the central bank and cryptocurrencies are digital assets on a decentralized network, away from any government or central bank’s chains. The digital currency will be the same as a sovereign currency and exchangeable at par with the existing currency. On the other hand, cryptocurrency is a form of currency that has its own denomination and uses cryptography to secure transactions.
“24 hours, you can draw CBDC. And if you are carrying excess CBDC, you can deposit it in the bank,” the RBI governor said.
On the impact of US Federal Reserve’s impact on India’s monetary policy, Das said though the US is a major player, India’s monetary policy is primarily governed by its domestic factors.
He also highlighted the accuracy of the GDP growth projection for the September 2022 quarter of 6.3 per cent and inflation for the November projection. Das said the RBI is refining its inflation and growth projection models.
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