Cryptocurrencies pose a huge risk to financial stability and monetary stability. Reserve Bank of India Governor Shaktikanta Das said this at an event organized at the Peterson Institute for International Economics on Friday.
He said – I am really of the opinion that this is something that should not be allowed to dominate the financial system. It also creates risks for the banking system. It could also create a situation where the central bank could lose control of the money supply in the economy.
If the central bank loses control over the money supply in the economy, how will it check the money available in the banking system? How can a central bank control inflation by reducing the money supply or losing the money supply in times of crisis? That's why we view crypto as a big risk.
Cryptocurrency a matter of concern for central banks around the world
Shaktikanta Das said there should be an international understanding for cryptocurrencies as transactions are cross-country. One must be fully aware of the major risks associated with this.
I don't think it should be encouraged. As guardians of financial stability, it is a matter of great concern for central banks around the world. Governments are also becoming increasingly aware of the potential risks in cryptocurrencies.
India is the first country to raise questions about cryptocurrency
Das said that India was the first country to raise questions about cryptocurrencies. Under India's chairmanship of the G-20, it was agreed to develop international understanding on how to deal with the crypto ecosystem. He said that some progress has been made in this regard.
He said – I think more work still needs to be done. From India's perspective, from the Reserve Bank's perspective, I think we are one of the first central banks that have expressed very clearly their serious concerns about cryptocurrencies.
Graphics Source: VaskarAssets
