Reserve Bank of India Appeals for Banning Cryptocurrencies
For quite some time, national institutes of financials and economies in India have been insisting on banning cryptocurrencies altogether.
The most recent one is the Reserve Bank of India (RBI), particularly RBI’s man in charge namely Governor Shaktikanta Das.
An event called ‘Business Today’s Banking & Economy Summit 2023’, was held on 13th January 2023 in India. The event was also attended by the Governor of RBI as the key guest speaker.
During his address, Governor Das explained RBI’s views, particularly with regard to digital currencies. He stated that RBI is of the considered view that the use of digital currencies in India should be banned altogether.
Das specifically made mention of Bitcoin and Ethereum to suggest ‘India does not have any place neither for them nor others like them’. He was seen remarking very specifically that RBI encourages the banning of cryptocurrencies.
Governor Das then went on to point out the reasons why RBI thinks cryptocurrencies have no place in India. He explained first of all that the ‘underlying value’ in digital currencies is missing.
He then explained that the status of cryptocurrencies is vague and disputed in many parts of the world. He stated that some treat them as ‘assets’, while others as ‘securities’, and some even call them ‘financial products’.
Das argued that an asset as well as a financial product do have underlying values. However, in the case of digital assets, underlying values are completely missing, argued Governor Das.
Value-Based on Mere “Speculation”
The Governor of RBI also expressed his thoughts on the aspects on the basis from which the value of a digital currency is derived.
According to Governor Das, there is no mechanism through which the values of digital currencies can be determined. He argued that their value determination process is rather based on mere ‘speculation’, which to him is clumsy.
What he appreciated regarding digital currencies was that they could be very helpful for the purposes of gambling only. However, he rejected the idea of letting them become part of the financial system, particularly of India.
Crypto for Gambling
He commented that a product whose value is based on assumptions is no more than a ‘speculative product’. Such products are made specifically for the purposes of gambling, suggested Governor Das.
He also pointed out that gambling is illegal in India and if somebody wants to gamble then be aware of the punishment. He advised that if somebody is inclined to gamble, then do it outside India where gambling is legal.
As regards crypto being a ‘financial product’, he rejected the concept with the argument that “such an assumption is ill-founded”.
Cryptocurrencies are not at all backed by any kind of physical asset or collateral. Therefore, it is simply a false assumption that cryptocurrencies are financial products when their nature matches the likes of gambling.
RBI Governor Warns Investors
In the end part of his address, Governor Das once again reverted back to cryptocurrencies and started to discuss risks.
He warned investors that their engagement with digital assets would adversely impact the national economy.
They may be investing in cryptocurrencies hoping for higher gains but something far more catastrophic than the FTX crash may end up happening.
If that happens, countries with a large number of investors investing money into cryptocurrencies will end up destabilizing their economies.
Das explained that allowing cryptocurrencies to merge in local markets would be like compromising the stability of the Indian economy.
He argued that crypto existence in India would jeopardize the money supply to the national economy.
He further argued that RBI would lose its grip over the economy which would ultimately introduce dollarization in the Indian economy.
Looking at RBI Governor’s remarks, it seems that cryptocurrencies’ future in India is dark. On the other hand, a large number of Indian investors have put huge stakes in cryptocurrencies who would also be at great risk.