Cryptocurrencies are a major threat 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 view that this is something that should not be allowed to dominate the financial system. It poses a risk to the banking system. It can also create a situation where the central bank can lose control over the money supply in the economy.
If the central bank loses control over the money supply in the economy, how will it check the liquidity available in the banking system? How can a central bank control inflation by reducing the money supply or even losing the money supply in times of crisis? That's why we see crypto as a big risk.
Cryptocurrencies are a concern for central banks around the world Shaktikanta Das said there should be an international understanding for cryptocurrencies, as transactions are cross-country. One should be fully aware of the major risks associated with this.
I don't think it should be encouraged. As the custodian of financial stability, it is of great concern to 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 question cryptocurrency. The G-20, under India's chairmanship, agreed to develop an international understanding on how to deal with the crypto ecosystem. He said that some progress has been made in this matter.
He said- I think more work 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 their serious concerns about cryptocurrencies very clearly.
Cryptocurrencies arose to bypass the system RBI Governor said that first of all we have to understand the origin of cryptocurrency. It originated to bypass the system. Cryptocurrencies have all the properties of money. The fundamental question is whether we, as the authorities, are satisfied with the declared cryptocurrencies.
The big question is whether we are comfortable with crypto, which has the characteristics of being a currency. Or are we content to have a private currency system parallel to fiat currency? Obviously, if a certain part of your economy is isolated and is dominated by crypto assets or private crypto, the central bank loses control over the entire monetary system.
therefore, This will create extreme instability in the monetary system. It can also lead to massive instability in the financial sector. There are huge risks involved, so we are making it clear that we have to deal with this very carefully.
What is cryptocurrency? Cryptocurrency is a type of virtual currency. It is also called digital currency. Cryptocurrencies can be transacted like currencies like dollars or rupees.
Among these, Bitcoin is the most popular cryptocurrency. Each Bitcoin transaction is recorded in a public list via the blockchain, a record maintenance system managed by individual users in a decentralized manner.
History of Cryptocurrencies
- In 1983, American cryptographer David Chem created the first cryptographic electronic money called e-cash.
- It was implemented in 1995 by DigiCash.
- This first cryptographic electronic money required software to withdraw from banks in the form of notes.
- This software is fully encrypted. Through the software, the recipient of the cryptographic electronic money was given an encrypted key, i.e. a special type of key.
- Using this software, the issuing bank, government or other third party transactions could not be tracked.
- In 1996, the US National Security Agency published a paper describing the cryptocurrency system.
- In 2009, a virtual creator named Satoshi Nakamoto created a cryptocurrency called Bitcoin. It was only after this that cryptocurrency became known worldwide.
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