The Reserve Bank of India (RBI) Governor Shaktikanta Das has once again emphasized the potential threats that cryptocurrencies pose to global financial stability, particularly for emerging market economies. Speaking at the Business Standard BFSI Insight Summit 2023 in Mumbai, Das stressed the importance of dealing with cryptocurrencies responsibly.
Understanding and Regulating Cryptocurrencies
Das highlighted the need for country-specific regulations, especially in emerging markets, citing the International Monetary Fund (IMF) and Financial Stability Board (FSB) synthesis paper. This paper provides guidelines and a roadmap for cryptocurrency regulation, addressing the potential risks associated with these digital assets. Governor Das expressed concerns about the challenges of regulating cryptocurrencies and raised fundamental questions about their nature.
“There is a lack of a clear, universally accepted definition of what cryptocurrencies represent,” said Das. He further questioned whether cryptocurrencies should be classified as products, financial assets, or something entirely different due to their intangible nature.
Comparing Cryptocurrencies and Central Bank Digital Currencies (CBDCs)
Besides addressing the regulatory aspect, Governor Das also emphasized the need to understand the broader purpose of cryptocurrencies in comparison to Central Bank Digital Currencies (CBDCs). He sought a compelling explanation for what cryptocurrencies offer in terms of international and domestic transactions that CBDCs cannot fulfill.
Additionally, Das raised the crucial issue of private cryptocurrencies coexisting with sovereign fiat currencies issued by central banks. He questioned whether governments and central banks worldwide are comfortable with this new currency system.
“The G20 finance ministers and central bank governors had previously adopted the roadmap on crypto assets proposed in the IMF-FSB synthesis paper,” stated Das. This roadmap calls for swift and coordinated implementation, reflecting a global effort to address cryptocurrency-related risks.
Main Focus: Macroeconomic Stability
While acknowledging the concerns of crypto businesses, Governor Das clarified that the RBI’s main priority is maintaining macroeconomic stability. The intention is not to stifle innovation but to ensure that innovation aligns with the broader public interest and serves a purpose beneficial to society.
