Shaktikanta Das, the governor reserve Bank of India (RBI) expressed at an event organized by The Indian Express and Financial Times on Thursday that the central bank continues to have ‘serious and major’ concerns regarding cryptocurrencies such as Bitcoin, reported PTI. This concern has been conveyed to the Government of India. Das, however, said that the government has to take the final call on the issue and they have to decide what to do on the matter, as per the report. Das said the Reserve Bank of India wants credible explanation and answers about the value that such instruments (cryptocurrencies) can achieve to the Indian economy.
It should be noted that while cryptocurrencies are under regulatory watch and have been for some time, the government is still on the fence as to whether or not to allow them altogether. This is despite their apparent lack of regulation, highly complex mining processes and price volatility that make it such a volatile financial instrument. According to the report, there have been calls for treating cryptocurrencies as foreign assets for the time being.
El Salvador was one of the first countries to recognize bitcoin as official property. The South American nation recognized digital assets earlier this week on September 7, 2021. The country decided to adopt crypto as legal tender. In the wake of this, the country is witnessing waves of civil unrest following a 20 per cent fall in the currency’s value correction in a single day, the report noted.
Speaking at the event, Das said, “We have conveyed our serious and major concerns regarding cryptocurrencies to the government from the point of view of financial stability. The government will take a decision.”
“I think we need more credible answers as to whether going forward, the entire private cryptocurrency, what will it contribute to the Indian economy going forward. I think we need to be convinced with more credible explanations and answers “
The apex bank had initially prohibited domestic lenders from facilitating investor trading in cryptocurrencies, but this was reversed after the Supreme Court struck down the order. It was alleged that some banks have resumed these services. Earlier this year in March, Das said he had reason to believe that the government shares the concerns that were flagged by the RBI, according to the report.
On a parallel note, India is taking steps towards its own form of legally recognized digital rupee. Also called Central Bank Digital Currency, RBI is gearing up for a phased introduction of the asset. Das mentioned last month that the digital currency would be introduced with trial programs by December. Unlike cryptocurrency, central bank digital currency will be regulated. Most interestingly, it will not be an asset so to speak, but a digital reflection of the current monetary system. It will be exchangeable one-to-one with the Indian Rupee.
Cryptocurrencies, on the other hand, can be thought of as commodities that have a fixed value, such as gold or silver. That value will be the same across the board, regardless of the country in which it is traded, with the only factor considered to be the currency conversion rate that will represent that value. Das had mentioned that the RBI aims to launch the central bank’s digital currency as a digital asset on a large scale. RBI had issued a note stating that the central bank’s digital currency and its interest as an asset is universal. However, some countries have even come close to the pilot phase of launching such an effort.
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