Shaktikanta Das, governor of the Reserve Bank of India (RBI), stated on Wednesday that if private digital coins are allowed to develop, the global crypto meltdown would cause the next financial crisis, which will affect millions of investors.
Das emphasised that cryptocurrencies have no “underlying value” and represent significant hazards to global macroeconomic and financial stability when speaking to a group of politicians and leaders from the banking industry.
“After the development of the last one year, including the latest episode surrounding FTX, I don’t think we need to say anything more,” Das said.
“Crypto or private cryptocurrency is a fashionable way of describing what is otherwise a 100 per cent speculative activity,” he added.
Upon the collapse of the cryptocurrency exchange FTX, US authorities detained San Bankman-Fried, its former CEO, in the Bahamas and filed formal charges against him for defrauding stock investors.
Since 2019, FTX has raised more than $1.8 billion from equity investors, including over $1.1 billion from 90 US-based investors, according to the US Securities and Exchange Commission’s (SEC) lawsuit.
In order to increase financial inclusion and shift the economy away from cash, the RBI launched a pilot project last month to introduce its own digital rupee in the wholesale sector. This month, it wants to launch a second experiment in the retail sector (CBDC).
The CBDCs can accelerate innovation in cross-border payments by enabling immediate transactions and assisting in overcoming significant difficulties related to time zone differences, exchange rate variations, as well as legal and regulatory constraints in various jurisdictions.
Additionally, the interoperability of CBDCs offers ways to reduce risks and frictions associated with cross-border and cross-currency transactions while enhancing the function of central bank money as a payment system anchor.
Therefore, one of the main reasons for considering its issuance is the CBDC’s potential utility in easing cross-border payment difficulties.
The government has yet to introduce a bill in Parliament that will outlaw all private cryptocurrencies in India.