SUMMARY
- RBI Governor, Shaktikanta Das, has cautioned against the dominance of cryptocurrencies.
- They possess significant threats to the economy’s financial, monetary stability, and banking stability.
- Das emphasized international collaboration considering the global nature of crypto currencies.
In a period where cyber-attacks on Indian websites have surged by 261% YoY in the first quarter of 2024, RBI Governor, Shaktikanta Das, has cautioned against the dominance of cryptocurrencies due to their significant threats to the economy’s financial and monetary stability, as well as the stability of the banking sector.
According to a report from PTI, Das pointed out the dangers associated with cryptocurrencies, highlighting that should central banks lose control over the circulation of money, it would become difficult to manage liquidity and control inflation during emergencies.
Speaking at the Peterson Institute for International Economics, Das stated,“I am actually of the opinion that this is something that should not be allowed to dominate the financial system because it has huge financial stability risks, it has huge monetary stability risks, and it also poses risks to the banking system. It may create a situation where the central bank could lose control of the money supply in the economy.”
“There has to be an international understanding on this issue, being fully mindful of the huge risks associated with cryptocurrencies. This is not something which I feel should be encouraged. This view is not a very popular one, but I think as custodians of financial stability, it is a major concern for central banks worldwide. Governments are also becoming increasingly aware of the possible downside risks in cryptocurrencies,” he further added emphasizing international collaboration.
He also shared that the Reserve Bank of India has been among the first to express serious concerns about cryptocurrencies, viewing them as major threats to the economy’s financial stability and having valid reasons for their cautious approach.
Das further explained the importance of understanding the origins of cryptocurrencies, which were created to circumvent traditional financial systems. He noted that cryptocurrencies exhibit all the attributes of money.
He also added that the issuance of currency is a responsibility of the government, raising questions about the compatibility of cryptocurrencies with traditional currencies.
This warning comes at a time when WazirX experienced a significant data breach, resulting in the theft of around $230 million worth of digital assets. This breach compromised nearly 45% of WazirX’s total assets, leading to a liability of $546 million for the crypto exchange. Additionally, the company submitted a petition to the High Court of Singapore, disclosing the data of over 240,000 wallet addresses.
Months following the breach, government agencies initiated an investigation into the incident, aiming to gather information on the unauthorized transfer of cryptocurrency tokens from its accounts.
