Central Bank of India chief warns that if allowed to grow, crypto will cause next financial crisis • InNewCL
Central Bank of India chief warns that if allowed to grow, crypto will cause next financial crisis • InNewCL
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The governor of India’s central bank said on Wednesday that it is not at war with crypto, but maintained that cryptocurrencies have no underlying fundamentals and their use should be banned.
RBI Gov. Shaktikanta Das told a roomful of bank executives and lawmakers that crypto poses huge inherent risk to the nation’s macroeconomics and stability. “After the last year’s development, 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 is worth today.”
“Change in value in any so-called product is the function of the market. But unlike any other asset or product, our main concern with crypto is that it has no underlying asset whatsoever. I think crypto or private cryptocurrency is a fashionable way to describe what is otherwise a 100% speculative activity,” Das said.
Das said crypto owes its origins to the idea that it bypasses or breaks the existing financial system. “They don’t believe in the central bank, they don’t believe in regulated finance. I have yet to hear a good argument about what public purpose it serves,” he said, adding that he believes crypto should be banned.
“It should be banned because if it’s allowed to grow…let’s say it’s regulated and allowed to grow…please mark my words that the next financial crisis will come from private cryptocurrencies,” he said.
India is among the nations that have adopted a strict approach when dealing with cryptocurrencies. Earlier this year, it began taxing virtual currencies by imposing a 30% tax on profits and a 1% deduction on each crypto transaction.
The nation’s move has severely drained the transactions of local exchanges CoinSwitch Kuber, backed by Sequoia India and Andreessen Horowitz, and CoinDCX, backed by Pantera, alongside the market downturn in the nation.
Changpeng “CZ” Zhao, founder and CEO of the world’s largest crypto exchange Binance, told InNewCL in a recent interview that the firm does not see India as a “very crypto-friendly environment.” He said the company is trying to escalate its local taxation concerns to the local authority, but claimed it usually takes a long time for tax policy to change.
“Binance is going to countries where the regulations are crypto and business friendly. We don’t go to countries where we don’t have a sustainable business – or any business, whether we go or not,” he said.
Coinbase, which has supported both CoinDCX and CoinSwitch Kuber, launched its crypto platform in the country earlier this year but quickly rolled back the service due to regulatory concerns. Brian Armstrong, Coinbase co-founder and chief executive officer, said in May that the company is removing Coinbase’s support for local payments infra UPI “due to informal pressure from the [central bank] Reserve Bank of India.”
“Crypto ended 2021 with the narrative that funding as we know it was slow, inefficient and clumsy. Defi and DAOs were the way forward. Crypto prices, in their own lingo, were floating and investors HODLing. Since May 2022, cryptos have lost some of their luster – two-thirds of their value. The failure of some units has caused the ecosystem to collapse,” RBI Deputy Governor T. Rabi Sankar, who once likened crypto to the Tulip and Ponzi scheme, said on Wednesday.
“The technology heralded as the end of government, and regulators and intermediaries — the underlying philosophy of crypto — is now desperate to be regulated,” he said.
