The RBI Governor criticizes cryptocurrencies in the BFSI Insight Summit 2022.
The RBI Governor raised three major concerns regarding cryptocurrency at the Summit.
Cryptocurrencies, according to Das, pose a threat to macroeconomic stability.
Long been a vocal opponent of cryptocurrencies, speaking out publicly on several occasions about the threat crypto pose to India's financial stability.
The central bank governor continues to maintain his hawkish stance against the crypto sector, claiming that allowing private cryptocurrencies to grow will be the cause of the next major financial crisis.
Speaking at the Bussiness Standard BFSI Insight Summit 2022, Das stated that cryptocurrencies have no fundamental value and pose "huge inherent risks" to India's financial stability. Das noted that he still believes digital assets should be prohibited.
Das also stated that the recent FTX meltdown has resulted in a market loss of nearly $40 billion. "I don't think we need to say anything else after the episode of FTX."
However, Das claimed that he has yet to hear a credible argument for crypto's public good. There is no clarity on the subject. He classified cryptocurrency as speculative assets, which should be prohibited.
The RBI Governor also mentioned that there are three main concerns with cryptocurrency. CoinGabbar is sharing these concerns with credible arguments for cryptocurrencies.
Firstly, private crypto owes its origin to 'breaking the system' and they do not believe in the regulated financial world
Answer - Cryptocurrency is based on blockchain technology that decentralizes the powers from the hands of centralized decision-making bodies to the masses. It is true that it goes against the causes of banks and centralized financial institutions but decentralization is all about enabling the true owner of the assets to be in complete control. The crypto world is not against regulations, in fact leading cryptocurrency exchanges in India are closely working with the Finance Ministry and Income Tax Department to frame a regulatory framework for cryptocurrency in the country.
Secondly, cryptocurrency has absolutely no underlying basis and there is also no clarity on what public good or purpose they serve
The RBI governor has said that cryptocurrencies do not have any underlying values, however, this is not true. All the leading cryptocurrencies have their specified use cases and their tokens play a crucial factor in incentivizing the service providers and creators. Crypto tokens are not mere random tokens that are gaining value and falling on social media trends, they derive their value from their use cases and limited supply.
When it comes to ‘public good’, cryptocurrency has made it possible for end users to conduct 100% secure financial transactions without having any intermediaries in between. Blockchain products are enabling the development of decentralized applications that are completely transparent and do not need to rely on the mercy of a centralized organization. Blockchain and cryptocurrencies have come with an aim to democratize the finances for all and that aligns perfectly with the view of the largest democracy in the world.
Thirdly, it’s a 100 percent speculative activity that is clear post-FTX, making it a risky asset
Here, the Governor of the Reserve Bank of India is correlating the fallout of a centralized cryptocurrency exchange with the credibility of cryptocurrencies. Mr. Das makes a distinction by referring CBDCs as government-backed cryptocurrencies and other cryptocurrency projects as ‘Private Cryptocurrencies’. However, we would like to correct this statement by stating the fact that none of the blockchains are private and all the on-chain data is publicly available. The right distinction should be government-backed CBDCs and publicly scrutable blockchain tokens.
The fall of FTX was the fall of a centralized entity in the blockchain space that has again highlighted the significance of decentralization. FTX fell because of a preplanned execution of traditional financial frauds by Sam Bankman Fried that was in direct contact with the policymakers of the USA.
Cryptocurrency markets are highly volatile due to the lack of sufficient regulations, immature investors, and high market activity. With time, crypto markets are expected to be much more stable and mature.
India is one of the countries that has taken a strict stance on cryptocurrencies. It began taxing virtual currencies earlier this year, imposing a 30% tax on gains and a 1% TDS deduction on each crypto transaction.
However, yesterday’s parliamentary session has given some sign of relief to the Indian crypto community. Yesterday, the Ministry of State for Finance stated that the government is willing to establish a crypto regulation with international collaboration.
This indicates that, aside from the RBI, other Indian government bodies have a positive attitude toward cryptocurrencies. Experts believe Mr. Das is making such contradictory statements in order to pave the way for the launch of a retail CBDC/Digital Rupee in the Indian digital currency market.
What are your thoughts on the RBI Governor's contradictory statements about cryptocurrencies? Do you believe India will establish its own cryptocurrency legislation in the future? Share your thoughts in the comment section below.
Read also: Income Tax on Cryptocurrencies in India: Knowing Your Taxes in 2023
