Cryptocurrencies have no underlying value, RBI Governor Shaktikanta Das said.
India’s central bank Governor Shaktikanta Das, a long-time opponent of cryptocurrencies, launched another broadside against digital tokens, saying they have no underlying value and are a threat to financial stability.
“Investors in cryptocurrency should keep in mind that they are investing at their own risk. They should also keep in mind that the cryptocurrency has no underlying, not even a tulip,” the Reserve Bank of India chief said Thursday, referring to the Dutch tulip bulb market bubble in the 17th century.
Governor Das’s comments come days after the Indian government removed uncertainty about the legal status of crypto trading. In the federal budget speech February 1, Finance Minister Nirmala Sitharaman announced steep taxes for such transactions, effectively treating them as winnings from activities like gambling that are legal albeit not encouraged. Regulations are awaited.
The RBI, for its part, has taken a strong stance against private digital currencies. Given cryptocurrencies are designed to be traded freely and anonymously, the central bank is worried about capital controls, especially as it has a tight grip over the partially-convertible Indian rupee. Issues such as money laundering and terrorism financing have been raised as concerns.
“Private crypto currency or whatever name you call is a big threat to our macroeconomic stability and financial stability,” Das said.
To somewhat blunt the impact from cryptocurrencies, RBI is developing its own digital rupee, although Das declined to give a firm time frame by when it will be ready. In the budget, Sitharaman said a central bank digital currency would be ready by sometime in the next financial year that starts on April 1.
“We are making progress on CBDCs after carefully, cautiously examining it because there are risks,” he said. “The biggest risk is of cybersecurity and possibility of counterfeiting. We should absolutely prevent that.”