Reserve Bank of India (RBI) governor Shaktikanta Das on Thursday described cryptocurrencies as “clear danger” and said anything that derives value based on pretending, without any underlying asset, is just speculation under a sophisticated name.
The government is finalizing a consultation paper on cryptocurrencies after gathering input from various stakeholders and institutions.
The RBI has raised concerns about cryptocurrencies, which are seen as a highly speculative asset.
In the foreword to the 25th issue of the Financial Stability Report (FSR) released Thursday, Das also said that as the financial system becomes more digital, cyber risks are increasing and need special attention.
“We need to be aware of the emerging risks on the horizon. Cryptocurrencies are an obvious danger. Anything deriving value on the basis of pretending, without any underlying asset, is just speculation under a sophisticated name,” Das said.
In recent weeks, cryptocurrencies, which have no underlying asset, have witnessed massive volatility amid global uncertainties.
RBI first issued a circular on cryptocurrencies in 2018 and had banned its regulated entities from trading such instruments. However, at the beginning of 2020, the Supreme Court annulled the circular.
While there is still no clarity on the regulations governing the cryptocurrency space in the country, the government is working to finalize a consultation paper on cryptocurrencies with input from various stakeholders and institutions, including the World Bank and the IMF.
In the foreword to the FSR, Das also said that while technology has supported the reach of the financial sector and its benefits must be fully exploited, the potential to disrupt financial stability must be guarded against.
“As the financial system becomes more and more digitized, cyber risks are increasing and need special attention,” he noted.
Turning to the economy, he said it is skewed toward global spillovers and geopolitical tensions.
The Indian financial system is showing underlying robustness and resilience to withstand these shocks. “Our aim is to face all challenges, both external and internal, with strength and innovative solutions for the Indian financial system,” he added.
A notable feature of the current situation is the overall resilience of Indian financial institutions, which should serve the economy well if it improves its outlook. This reflects a combination of good governance and risk management practices, he said.
According to him, the stress test results presented in the FSR show that banks are well positioned to withstand even severe stress scenarios without falling below the minimum capital requirement.
He also said that the corporate sector is deleveraging with stronger results and that the external sector is well buffered to withstand ongoing terms of trade shocks and portfolio outflows.
“In a dynamic environment of significant uncertainty, we have been proactive and agile in our policy responses. We have aligned our actions with the need of the hour and strived to maintain macroeconomic and financial stability to ensure sustainable and inclusive growth” , he said. said.