RBI Governor Shaktikanta Das has once again sounded the alarm regarding the potential dangers posed by cryptocurrencies to the stability of the global financial landscape, with a particular emphasis on the vulnerabilities they present to emerging economies.
During his address at the Business Standard BFSI Insight Summit 2023 in Mumbai, Governor Das emphasized the imperative of approaching cryptocurrencies with a sense of responsibility and diligence.
The crux of his message revolved around the risks associated with cryptocurrencies, with reference to a synthesis paper jointly published by the International Monetary Fund (IMF) and the Financial Stability Board (FSB). This paper serves as a guide, outlining the necessity for tailored regulatory measures, especially in emerging markets.
Governor Das expressed his reservations about the intricacies of regulating cryptocurrencies, raising fundamental questions about the intrinsic nature of these digital assets. One of the core challenges he brought to light was the absence of a definitive, universally accepted definition of what cryptocurrencies truly represent. This ambiguity has led him to ponder whether cryptocurrencies should be categorized as commodities, financial instruments, or a category entirely distinct, owing to their intangible essence.
Additionally, he underscored the need to comprehend the overarching utility of cryptocurrencies when juxtaposed with Central Bank Digital Currencies (CBDCs). Governor Das called for a clear rationale that could elucidate what unique advantages cryptocurrencies offer in international and domestic transactions that CBDCs cannot adequately fulfill.
Another critical facet he addressed was the coexistence of private cryptocurrencies alongside sovereign fiat currencies issued by central banks. This juxtaposition raised pertinent questions about the comfort levels of governments and central banks worldwide with this new currency ecosystem.
Governor Das pointed out that the G20 finance ministers and central bank governors had previously adopted the roadmap laid out in the IMF-FSB synthesis paper for dealing with crypto assets. This roadmap necessitates swift and coordinated implementation, reflecting a concerted global effort to tackle the potential risks associated with cryptocurrencies.
He reiterated that while he acknowledges the concerns of cryptocurrency businesses, the RBI’s primary focus remains on upholding macroeconomic stability. He clarified that the regulator’s intent is not to stifle innovation but rather to ensure that innovation aligns with the broader public interest and serves a purpose that is beneficial to society as a whole.