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Indian Central Bank RBI: Cryptocurrencies Are a Clear Danger — Financial Stability Risks Likely to Grow Skip to main content

Indian Central Bank RBI: Cryptocurrencies Are a Clear Danger — Financial Stability Risks Likely to Grow

Indian Central Bank RBI Says Cryptocurrencies Are a Clear Danger, Financial Stability Risks Currently Limited

India’s central bank, the Reserve Bank of India (RBI), sees cryptocurrencies as “a clear danger.” However, the financial stability risks posed by crypto assets currently appear to be “limited.”

RBI on Crypto’s Danger and Financial Stability Risks

The Reserve Bank of India (RBI) released the 25th issue of its Financial Stability Report (FSR) Thursday. RBI Governor Shaktikanta Das wrote:

Cryptocurrencies are a clear danger. Anything that derives value based on make believe, without any underlying, is just speculation under a sophisticated name.

The RBI chief further opined: “While technology has supported the reach of the financial sector and its benefits must be fully harnessed, its potential to disrupt financial stability has to be guarded against.”

The Indian central bank’s report explores financial stability risks posed by crypto assets, citing various studies, including the work by the Financial Stability Board (FSB). The report states:

The risks from cryptoassets to financial stability appear to be currently limited as the overall size is small (0.4 per cent of global financial assets).

In addition, it notes that crypto’s “interconnectedness with the traditional financial system is restricted.”

Nonetheless, the report adds:

The associated risks are, however, likely to grow as these assets and the ecosystem supporting their growth are evolving.

The report also discusses stablecoins and central bank digital currencies (CBDCs). The RBI noted: “The risks from stablecoins that claim to maintain a stable value against existing fiat currencies require close monitoring, in particular.”

The RBI statement on financial stability and crypto echoes the comments on the subject by Christine Lagarde, the president of the European Central Bank (ECB). “Crypto assets and decentralized finance (defi) have the potential to pose real risks to financial stability,” she said in June. “This would be particularly the case if the rapid growth of crypto-asset markets and services continue … and the interconnectedness with both the traditional financial sector and the broader economy is intensified.”

What do you think about the comments by the Indian central bank? Let us know in the comments section below.

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