Private cryptocurrencies can cause next financial crisis if allowed to grow, warns RBI Governor

Pressing for the prohibition of instruments like Bitcoin, Reserve Bank Governor Shaktikanta Das on Wednesday warned that the next financial crisis can be triggered by private cryptocurrencies, if such speculative instruments are allowed to grow.

Das has been staunchly opposed to such instruments and the RBI has gone till the Supreme Court with its contention. “Cryptocurrencies have huge inherent risks from macroeconomic and financial stability (perspective) and we have been pointing it out,” he said, speaking at an event organised by the Business Standard here. The RBI governor added that the developments over the last one year, which include the latest crash of cryptocurrency exchange FTX, which is termed as one of the biggest financial frauds in the history of the US, illustrate the threat posed by such instruments.

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“After all these, I don’t think we need to say anything more about our stand,” Das said, adding that private cryptocurrencies’ valuation has shrunk from USD 190 billion to USD 140 billion and there is no underlying value for the market-determined price. “It’s a 100 per cent speculative activity, and I would still hold the view that it should be prohibited if you try to regulate it and allow it to grow, please mark my words, the next financial crisis will come from private cryptocurrencies,” he said.

He acknowledged that different jurisdictions are taking different stances on it, but the RBI would like to stick to its stance of prohibiting them completely. Das said the origin of private cryptocurrencies lie in their intent to “break” the system, in not believing in fiat currencies introduced by the central banks and not believing in a regulated financial system.

“They want to bypass and beat the system,” Das said, adding that he is yet to come across any credible argument which can demonstrate the public good served by such private cryptocurrencies.