Cryptocurrencies will possibly generate the following economic crisis, the Indian central bank chief alerts

December 23, 2022: On Wednesday, the coming financial crisis will be due to the private cryptocurrencies if these assets are permitted to increase, the head of India’s central bank warned.

“Cryptocurrencies have a huge inherent risk for our macroeconomic and financial stability,” Shaktikanta Das, the governor of the Reserve Bank of India, stated at an occasion. He suggested the latest collapse of FTX as an illustration.

Das stated that his main concern is that cryptocurrencies do not have any underlying value, approaching them as “speculative” and adding that they should be prohibited.

“It is a hundred per cent speculative activity, and I would hold the view that it should be banned because, if it is allowed to surge, if you try to regulate it and permit it to increase, please know my words, the coming financial crisis will come up from private crypto,” Das added.

Private cryptocurrencies related to digital coins such as bitcoin.

Das’ comments come as the central bank pressurises to introduce its digital type of the Indian rupee. The Reserve Bank of India started a pilot program for the digital rupee on December 1 for retail use in select cities. Certain users can transact using the digital rupee through apps and mobile wallets.

The digital rupee is a central bank digital currency (CBDC). Many central banks worldwide are considering issuing digital versions of their money.

Das said CBDCs could expedite international money transfers and reduce the need for logistics, like printing notes.

China’s central bank is the furthest ahead globally on the development of a CBDC. Beijing has been trialling its digital yuan in the real world since 2020, extending its availability to over-users this year.

Digital currency regulation was thrust more than the spotlight this year following a $1.3 trillion crash in the cryptocurrency market’s value and the FTX exchange’s high-profile collapse. China has effectively banned cryptocurrency trade.

The Indian administration wants cryptocurrency legislation that could ban certain activities all over the digital currencies to create a legal framework for the central bank’s digital currency.

Central banks usually state that cryptocurrencies do not pose a significant economic risk when representing a much smaller asset class. But many voices warn of the potential macroeconomic impact, mainly if cryptocurrencies go unregulated.