Reserve Bank of India (RBI) Governor Shaktikanta Das has cautioned Indian crypto investors of the huge risks posed by cryptocurrencies.
At the World Economic Forum in Davos, which concluded on January 20, 2024, Das emphasised the risks of the ongoing crypto surge, and cautioned against a correction, while also reiterating crypto’s potential impact on India’s banking system and the overall financial stability of the country.
“There is no underlying asset. It is not a currency, but it has the potential to become a currency in which event it can occupy the part of the payments system. It can impact your banking system and, therefore, it has very much risk involved in it,” The Times of India quoted Das as saying.
Das’ remarks came after the approval of Bitcoin exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC) on January 11, 2024. He added that India’s regulatory approach will be independent. “They (the US SEC) are responsible for their nation’s well-being, and we for ours,” he said.
Das’ warning seems to be in the right direction, particularly after Bitcoin’s recent struggle to maintain its value despite the much celebrated Bitcoin ETF launch on January 11, 2024.
Bitcoin, the largest cryptocurrency by market value, declined throughout last week since the launch of the Bitcoin-ETF. It is also struggling to manage volatility. On January 22, 2024 at 1 pm, BTC was trading at $40,995, after spiking to $49,000 last Thursday during the launch of the Bitcoin ETF — its highest level since December 2021.
BTC has dipped back into its early December 2023 levels prior to the SEC announcement. Experts have warned that if BTC fails to bounce from this level, a correction in the asset is predicted, as investors would note that despite the Bitcoin ETF launch, its value is not rising, which might prompt them to rethink the original value of the crypto asset.
“Some celebrate this as a new party, but they forget the crash a few years ago. Volatility, money laundering, and terror financing risks are inherent in these assets,” Das said.
Incidentally, Das’ cautionary stance against cryptocurrency is well-known. “The Reserve Bank, being the monetary authority of the country as the central bank, will lose control over the money supply in the economy … It will undermine the authority of the RBI and lead to the dollarisation of the economy,” Das had said last year.
