- RBI Governor Das has criticized stablecoins for undermining local currency sovereignty.
- He promotes CBDCs as the secure future of digital payments in India.
During a news conference on Friday, Reserve Bank of India (RBI) Governor Shantikanta Das voiced strong worries about the risks that cryptocurrencies indicate to financial and monetary stability. He highlighted that if cryptocurrencies take over the financial system, the central bank may lose control of the money supply in the economy, which could have serious consequences for liquidity management and inflation control.
Das said that cryptocurrencies present significant hazards to financial and monetary stability. If the central bank loses control of the money supply,” how will it manage liquidity in the system? How can it manage inflation during a crisis?” He argued that cryptocurrencies should not be allowed to dominate the financial landscape, pointing to possible dangers to the banking system.
Concerns Over Currency Sovereignty
The governor encouraged an international agreement on cryptocurrency regulation, recognizing the cross-border character of crypto transactions. Due to the significant hazards linked with cryptocurrencies, this issue requires global consensus. It’s not a popular opinion, but as custodians of financial stability, it remains a major worry for central banks around the world, Das said.
He stated that India was one of the first countries to question the ramifications of cryptocurrencies, citing conversations held under India’s G20 presidency to build a coordinated international response to the crypto ecosystem. Although some progress has been made, Das stated that further work is required.
In December 2022, India initiated its CBDC pilot program for the digital rupee, working with 16 institutions to explore various use cases. The program also investigates new functions, such as offline transactions and programmability features.
Das highlighted that CBDCs’ programmability has the potential to dramatically improve financial inclusion by allowing for targeted money delivery. However, he noted that India is not rushing to implement the digital rupee, the RBI intends to thoroughly evaluate its structure, functionality, and robustness before a full-scale introduction.
Das said that cryptocurrencies were created to bypass existing financial systems, asking fundamental questions such as: Are we, as authorities, comfortable with privately issued cryptocurrencies that have the characteristics of currency issuance? He cautioned that if cryptocurrencies take over any portion of the economy, the central bank risks losing control of the monetary system, resulting in instability in both the monetary and financial sectors.
Finally, Das highlighted the significance of adopting caution and care while dealing with cryptocurrencies, pushing for strong regulatory measures. Countries will make their own decisions, but we believe a strong approach is essential in addressing the risks posed by cryptocurrencies, according to him.
