Cryptocurrency isn’t money; must be banned: RBI Governor
Every financial product has to have some underlying; crypto has no underlying, and could destroy Indian economy by dollarizing it, said RBI Governor
Crypto is pure gambling and a danger to economy: RBI Governor Sahktikanta Das; pic source - RBI
The Reserve Bank of India Governor, Shaktikanta Das, has warned cryptocurrency could not only destroy finances of individual traders aka gambling, it could also be the cause of India’s next financial crisis unless it is banned.
Speaking with Business Today at the Banking and Economy Summit, Das cleared that there is no relation between money and cryptocurrency and blockchain that is touted to be the force behind crypto is just another technology. He hinted that the technology could also be used for money laundering and terror financing. Crypto is not digital currency as there is no underlying.
Das said, “What is crypto? Some people call it an asset. Some people call it a financial product but you will agree that every asset, every financial product has to have some underlying. In the case of crypto, there is no underlying…not even a tulip, alluding to the Dutch tulip mania.”
It is not uncommon to see news and advertisements guised as news boasting of surges of even 100% in a few weeks or months in crypto value. However, this has no basis – given private companies are driving crypto — and could collapse at any time.
Das said, “The increase in the market price of various kinds of crypto, which start at a particular place, then multiplies over in a matter of few weeks or few months is based on make-believe…anything without any underlying whose valuation is dependent entirely on make-believe is nothing but 100% speculation, or to put it very bluntly, it is gambling.”
“If you want to allow gambling, treat it as gambling and lay down the rules for gambling, but that’s not a financial product…crypto masquerading as a financial product or financial asset is a completely misplaced argument,” he added.
RBI’s position is very clear. It should be banned.
RBI Governor Shaktikanta Das, January 2023
About the potential to cause a financial crisis, Das said cryptocurrencies becoming a means of exchange for doing a transaction — most of it is dollar-denominated – could be a dangerous proposition.
He said, “Assume a situation where 20% of our transactions in the economy…are taking place through cryptos which are not issued by the central bank. It is issued by private companies across the world.
“The Reserve Bank, being the monetary authority of the country as the central bank, will lose control over the money supply in the economy and will lose control over 20% of the transactions in our economy. Reserve Bank’s ability to decide monetary policy, to decide on the liquidity of, the level of liquidity that needs to be maintained, the level of money supply M3 that has to be maintained in the economy, to that extent will get undermined.
“It will lead to a dollarisation of the economy. Believe me, these are not empty alarm signals. This can happen,” Das warned.
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