Edited by: Muhammad Harris
Last updated: December 21, 2022, 4:04 PM IST
RBI Governor Shaktikanta Das. (File photo: PTI)
The biggest concern with the private cryptocurrencies like Bitcoin and Ethereum is that they have no underlying asset, says RBI Governor Shaktikanta Das.
RBI Governor Shaktikanta Das said on Wednesday that the main concern with the privately owned cryptocurrencies, such as Bitcoin and Ethereum, is that they have no underlying asset, and if they are allowed to grow, the next financial crisis will come from such cryptocurrencies. He also said that these assets should be banned.
Speaking at the BFSI Insight Summit 2022 hosted by Business standard, he said, “Cryptocurrencies owe their origins to circumventing the system, breaking the system, they don’t believe in regulation… I have yet to hear any argument about what public interest it serves. It is 100 percent speculative activity and should be banned. If you allow it to grow, the next financial crisis will come from private cryptocurrencies.”
Das has also fallen heavily on cryptocurrencies in the past. He also previously said that these digital assets can create a lot of financial instability in terms of the central bank’s ability to set monetary policy.
When asked how the central bank digital currency (CBDC), or digital rupee, differs from current digital payment systems, Das said on Wednesday that UPI is a payment system, while CBDC itself is a currency. He also said that UPI involves the intermediation of banks, while CBDC is like a paper currency that is settled between those transacting, and there is an automatic sweep-in and sweep-out facility. Digital rupee will also cut costs over printing paper currency. A transfer takes place immediately.
Earlier this month, the RBI launched India’s digital currency on a trial basis. CBDC is a digital form of fiat currency issued by the central bank and cryptocurrencies are digital assets on a decentralized network away from government or central bank chains. The digital currency will be the same as a sovereign currency and redeemable on par with the existing currency. On the other hand, cryptocurrency is a form of currency that has its own denomination and uses cryptography to secure transactions.
“24 hours, you can draw CBDC. And if you have excess CBDC with you, you can deposit it in the bank,” the RBI governor said.
On the impact of the US Federal Reserve on India’s monetary policy, Das said that while the US is a major player, India’s monetary policy is mainly driven by domestic factors.
He also highlighted the accuracy of the GDP growth projection for the September 2022 quarter of 6.3 percent and inflation for the November projection. Das said the RBI is refining its inflation and growth projection models.
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