Reserve Bank of India (RBI) governor Shaktikanta Das has cautioned against the use of cryptocurrencies in India saying that the virtual currency could impact the financial stability of the country. In an interview with CNBC TV18, Das also said that cryptocurrencies could also impact the macroeconomic stability of the country. Also Read - Epic Games CEO warns against Fortnite cryptocurrency scam: Here’s what he said
“This [crypto] is something whose underlying [value] is nothing. There are big questions on how do you regulate it. Our position remains very clear, it will seriously undermine the monetary, financial, and macroeconomic stability of India,” the governor said, as reported by Gadgets 360. Also Read - UPI users will soon be able to link credit cards for online payments
The RBI governor also said that if cryptocurrencies had been regulated in India leading to Terra Luna, investors would have questioned the effectiveness of the law adding that RBI and the government were ‘in sync’ as far as regulating cryptocurrencies was concerned. “We have conveyed our position to the government and they will take a considered call,” he added. Also Read - India ready with consultation paper on cryptocurrencies: Economic Affairs Secretary
Notably, RBI Governor’s statement comes at a time when cryptocurrencies TerraUSD and Terra Luna collapse, which in turned destabalised the entire crypto ecosystem wiping nearly $200 billion worth of wealth from the cryptocurrency market in just 24 hours. At the time of of collapse, Terra USD, which was pegged one-on-one to US dollar, fell below USD 1 mark, Terra Luna’s value plummeted to nearly $0.
At the moment, TerraUSD is trading at $0.0066042, while Terra Luna is trading at $0.0001696.
It is worth noting that this is not the first time that the RBI Governor has warned against the use of cryotocurrencies. While announcing the bi-monthly investors’ budget in February this year, Das had cautioned investors against invoking the tulip bubble, which is considered to be the first financial bubble that that gripped the Netherlands back in the 17th century.
“Private cryptocurrency is a huge threat to macro-economic stability and financial stability…investors should keep this in mind that they are investing at their own risk,” Das said at the time, as reported by PTI.
“And these cryptocurrencies have no underlying (value) – not even a tulip,” he had warned.
More recently, the RBI official cautioned that use of cryptocurrencies that are based on the US Dollar could lead to the ‘dollarisation’ of India’s economy.
“Thus, increased acceptance of cryptocurrencies would result in effective ‘Dollarization’ of our economy6. Dollarization, it is well understood, would undermine the ability of authorities to control money supply or interest rates, as monetary policy would not have any impact on the non-Rupee currencies or payment instruments,” RBI Deputy Governor, T Rabi Sankar had said in a speech earlier this month.
“When that happens, India loses not just its currency, a defining feature of its sovereignty, but its policy control of the economy. With loss of traction for monetary policy, the ability to control inflation would be materially weakened,” he had added.