Cryptos pose danger to financial stability: RBI Governor
Das said in the prologue to the RBI's current financial stability report, released on Thursday, that cryptocurrencies are a fancy moniker for speculation.
- Jul 1, 2022,
- Updated Jul 1, 2022 11:04 AM IST
Shaktikanta Das, governor of the Reserve Bank of India (RBI), has reiterated his stance on cryptocurrencies. He described cryptocurrencies as a “clear danger to the financial stability of the country.”
Das said in the prologue to the RBI's current financial stability report, released on Thursday, that cryptocurrencies are a fancy moniker for speculation.
"While technology has supported the reach of the financial sector and its benefits must be fully harnessed, its potential to disrupt financial stability has to be guarded against," he penned in the report.
The RBI governor also warned about escalating cyber-crimes as financial networks become more digitised.
Das has previously expressed concern about the risks associated with cryptocurrency investments. Moreover, he has frequently expressed reservations about investing in cryptocurrency.
When announcing the bi-monthly monetary policy conclusion in February, Das warned investors by referencing the 17th-century' tulip mania,' widely regarded as the first financial bubble. He stressed that investors should keep in mind that cryptocurrencies have no underlying value, not even a tulip.
Furthermore, the paper stated that the dangers posed by crypto assets to financial stability appear to be limited at the moment because the overall size of the crypto markets are small, just 0.4 per cent of global financial assets, and their interconnection with the traditional financial system is limited.
Albeit, the report also warned that the risks connected with these assets and the ecosystem that supports their rise are expected to increase.
The report emphasised the importance of constantly monitoring stablecoins in particular.
"The risks from stablecoins that claim to maintain a stable value against existing fiat currencies require close monitoring, in particular - they are akin to money market funds and face similar redemption risks and investor runs because they are backed by assets that can lose value or become illiquid in times of market stress," the report highlighted.
According to the paper, private currencies have traditionally resulted in instability and, in the contemporary context, 'dollarisation,' since they form rival currency system(s), which can weaken sovereign control over the money supply, interest rates, and macroeconomic stability.
Furthermore, the financial stability assessment stated that cryptos may undermine financial stability because they are not a debt instrument or a financial asset and have no fundamental value.
Shaktikanta Das, governor of the Reserve Bank of India (RBI), has reiterated his stance on cryptocurrencies. He described cryptocurrencies as a “clear danger to the financial stability of the country.”
Das said in the prologue to the RBI's current financial stability report, released on Thursday, that cryptocurrencies are a fancy moniker for speculation.
"While technology has supported the reach of the financial sector and its benefits must be fully harnessed, its potential to disrupt financial stability has to be guarded against," he penned in the report.
The RBI governor also warned about escalating cyber-crimes as financial networks become more digitised.
Das has previously expressed concern about the risks associated with cryptocurrency investments. Moreover, he has frequently expressed reservations about investing in cryptocurrency.
When announcing the bi-monthly monetary policy conclusion in February, Das warned investors by referencing the 17th-century' tulip mania,' widely regarded as the first financial bubble. He stressed that investors should keep in mind that cryptocurrencies have no underlying value, not even a tulip.
Furthermore, the paper stated that the dangers posed by crypto assets to financial stability appear to be limited at the moment because the overall size of the crypto markets are small, just 0.4 per cent of global financial assets, and their interconnection with the traditional financial system is limited.
Albeit, the report also warned that the risks connected with these assets and the ecosystem that supports their rise are expected to increase.
The report emphasised the importance of constantly monitoring stablecoins in particular.
"The risks from stablecoins that claim to maintain a stable value against existing fiat currencies require close monitoring, in particular - they are akin to money market funds and face similar redemption risks and investor runs because they are backed by assets that can lose value or become illiquid in times of market stress," the report highlighted.
According to the paper, private currencies have traditionally resulted in instability and, in the contemporary context, 'dollarisation,' since they form rival currency system(s), which can weaken sovereign control over the money supply, interest rates, and macroeconomic stability.
Furthermore, the financial stability assessment stated that cryptos may undermine financial stability because they are not a debt instrument or a financial asset and have no fundamental value.