RBI Governor warns cryptocurrency will cause next financial crisis
The Reserve Bank of India (RBI) and its Governor Shaktikanta Das has never been big a fan of cryptocurrency. On Wednesday, Das reiterated his stance that crypto should be banned. Speaking at the Business Standard BSFI Insight Summit, he doubled down on his criticism of the alternate currency. The RBI Governor also spoke about India's economy and related concerns.
Why does this story matter?
- India is not known for its crypto-friendliness. The country has been strict in dealing with cryptocurrency.
- This year, it started levying a 30% tax on crypto gains and a 1% deduction on every transaction involving crypto. The RBI's attitude has been integral in shaping India's cryptocurrency policy.
- The RBI Governor's words prove that its attitude won't change, at least anytime soon.
Crypto is a risk to macroeconomic stability
Das said that the RBI is not at war with cryptocurrency, but asserted that the next financial crisis will be due to crypto. "Mark my words, (the) next financial crisis will come from private cryptocurrencies," he said. Das told the room full of banking executives and lawmakers that crypto has no underlying value and is a risk to macroeconomic and financial stability.
Crypto is only worth what it's worth today: Das
Das talked about the current state of crypto. At the end of 2021, the total market cap of crypto was above $2 trillion, and now it's under $815 billion. "After the development of the last year, including the latest episode surrounding FTX, I don't think we need to say anything more. Time has proven that crypto is worth what it's worth today," he said.
Cryptocurrency is just a speculative activity, says RBI Governor
According to the RBI Governor, crypto is simply a fashionable way of describing otherwise a speculative activity. "Our main concern with crypto is that it doesn't have any underlying whatsoever," he noted. "I'm yet to hear a good argument about what public purpose it serves," Das said. He closed his attack by saying that cryptocurrency should be prohibited.
External factors will cause a 'dent' in India's economy
Speaking at the event, the RBI Governor said that India's economy will be affected by external factors rather than internal activity. According to him, the underlying economic activity in India remains strong. However, the impact of external demand will cause a "dent" in the economy, he added. RBI has revised its expected growth rate for FY23 to 7% from 6.8%.