Crypto is a big threat to our financial stability: Das
NEW DELHI: Reserve Bank of India’s (RBI) governor Shaktikanta Das on Thursday warned people of risks in cryptocurrency investments, saying that there was no underlying value and they posed a “big threat to the country’s macroeconomic stability”.
He also compared it to the Dutch tulip market bubble of the 17th century. “Investors in cryptocurrency should keep in mind that they are investing at their own risk. They should also keep in mind that the cryptocurrency has no underlying, not even a tulip,” Das said.
In 1634, what is now known as tulipmania, people in Holland rushed to buy tulip bulbs, sending its prices soaring in what is largely known as the world’s first financial bubble. At one point, a single tulip bulb costs as much as it 68 kegs of beer in the country at the time.
The comments by Das, who was speaking at a press conference to announce the monetary policy committee (MPC) decisions on policy rates, come days after Union finance minister Nirmala Sitharaman announced a flat 30% tax on gains from crypto transactions, which she said at the time did not amount to a formal regulation.
While no official or comprehensive statistics are available, industry estimates peg the number of Indians who have invested in cryptocurrencies such Bitcoin and Ether at 15-20 million, with an estimated cumulative holding of around ₹4 lakh crore. “Private cryptocurrency or whatever name you call is a big threat to our macroeconomic stability and financial stability,” Das said.
RBI, for its part, has for long taken a strong stance against cryptocurrencies, banning the Indian financial system from transacting with these in 2017. The ban was later struck down by the Supreme Court and the government has since held wide ranging consultations to evolve a policy. Sitharaman on February 1, shortly after she unveiled the Budget, clarified that cryptocurrencies cannot be used for financial transactions.
To somewhat blunt the impact from cryptos, RBI is developing its own digital currency, although Das declined to give a firm time frame by when it will be ready. In the Budget, Sitharaman said a central bank digital currency would be ready by sometime in the next financial year that starts on April 1.
“We are making progress on CBDCs (Central bank digital currencies) after carefully, cautiously examining it because there are risks,” he said. “The biggest risk is of cybersecurity and possibility of counterfeiting. We should absolutely prevent that.”