“The Next Financial Crisis Will Come from Private Cryptocurrencies” says Reserve Bank India’s Governor

“The Next Financial Crisis Will Come from Private Cryptocurrencies” says Reserve Bank India’s Governor

  • Shaktikanta Das, the Governor of the Reserve Bank of India (RBI), claims ‘private’ cryptocurrencies will cause the next financial crisis and should be banned, although he approves of CBDCs.
  • Mr. Das points to the FTX collapse as a key example of why only centralized banking services should be allowed to operate. 

At the Business Standard BFSI Standard Summit on Wednesday, Shaktikanta Das announced his disapproval of all ‘private’ cryptocurrencies, whilst claiming that CBDCs are the legitimate way forward for the industry. 

"Please, mark my words, the next financial crisis will come from private cryptocurrencies…
They have no underlying value. They have huge inherent risks for our macroeconomic and financial stability. I am yet to hear any credible argument about what public good or what public purpose it serves."

This seemingly harsh stance looks inspired by the recent collapse of FTX along with other insolvencies and hacks. Das cited it as enough of a reason to ban privately owned cryptocurrencies.

“After all the developments over the last year, including the latest episode on FTX, I don’t think we need to say anything more about our stance," Das said.

The RBI’s stance is clear and paves the way for the conversation around CBDCs. RBI has plans for a Digital Rupee, and Das claims:

"You will see in days to come more and more central banks will embrace digital currencies and India has been in the forefront of the digital revolution in the current century."

As cited by many analysts and institutions, 2023 will likely be a year of regulation for the crypto industry. Introducing CBDCs will also change the cryptocurrency landscape, for better or worse. 

On the Flipside

  • Despite calls for bans and regulation surrounding privately owned cryptocurrencies, an inherent feature of cryptocurrencies is that they are immutable. You can’t outright ban something that can be so publicly accessed.

Why You Should Care

Updates regarding regulation and CBDCs are of significant importance to investors. Individual investors should also keep a close eye on their respective countries’ announcements regarding the crypto industry to avoid falling short of any new laws. Moving into 2023, it’s likely that regulation will increase the overall adoption of cryptocurrencies, whether that’s in the form of CBDCs or not.

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