India’s central bank governor has called cryptocurrencies a threat to the country’s financial stability. Why?
Reserve Bank of India Governor Shaktikanta Das said that cryptocurrencies “are a huge threat to the macroeconomic and financial stability” of the country. Das believes that cryptocurrency investors “should remember that crypto has no real value”. This statement comes just a week after Indian Finance Minister Nirmala Sitharaman announced a 30 per cent tax on income from digital assets, essentially the country’s willingness to regulate the cryptocurrency niche. We tell you more about the situation.
Note that the position of criticism of full-fledged cryptocurrencies is not new. For example, one of Russia’s richest men, Vladimir Potanin, said this week that the potential of the digital ruble is enough to supplant all other digital assets.
He also called Bitcoin and Etherium “unreliable” because regulators have no control over what happens to them. At the same time, financial instruments from the Central Bank will allegedly have the ability to stimulate the Russian economy. You can read more about the billionaire’s position here.
How the cryptocurrency industry is being fought
In addition, Sitharaman announced the creation of a central bank digital currency (CBDC), which will be handled by the Reserve Bank of India. “The digital rupee” could become real as early as next year. Das commented on the decision to create the CBDC. Here is his quote published by news outlet Decrypt.
We are moving ahead with the creation of CBDC after careful and cautious study of the concept and its risks. The biggest risk in this context is cybersecurity and the threat of counterfeiting. We should prevent this in any case.
Accordingly, work in this direction is already underway, and actively so. However, the timing predictions for the launch of such assets are usually wrong: for example, the start of testing of the digital rouble was planned for late 2021, but in the end it never happened. Most likely, the problem here is the scale of the testing, which requires serious infrastructure and the involvement of different regions of the country. China, however, has tentatively succeeded.
Reserve Bank of India Governor Shaktikanta Das
Recall that in 2018, the Reserve Bank of India issued a ban on cryptocurrency transactions for local banks. The restriction was lifted only in March last year, but representatives of the country’s main financial regulator have continued to insist on the negative consequences of crypto adoption.
Meanwhile, the European Commission (EC) has announced draft legislation to adopt the digital euro, which could be in place by early 2023. This information was confirmed by EC Financial Stability Commissioner Máiread McGuinness. Here is her rejoinder in which the official outlined the government’s plans.
Our goal is to have the regulation approved by the beginning of 2023.
EC Financial Stability Commissioner Meiread McGuinness
The European Central Bank is already exploring the potential for integrating the digital euro, with the first prototype project due by the end of 2023. After all approvals by Eurozone members, digital currency issuance is expected to begin in 2025. Consequently, even if all deadlines are met, the process will not start any time soon.
We think that we would hardly expect a different rejoinder from the representative of a certain country's main bank. After all, cryptocurrencies are decentralised and do not depend on a single authority, which is not at all in line with bankers' norms. That means they will continue to criticise crypto, claiming the benefits of their centralised counterparts - even if not yet issued.
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