- The head of India’s central bank has warned that crypto could cause the next financial crash
- RBI governor Shaktikanta Das warned that regulation would fail, and suggested a total ban for Indians
- Not all central banks agree with this philosophy
The governor of the Reserve Bank of India (RBI), Shaktikanta Das, has claimed that the growth of cryptocurrencies could spark the next financial crisis. Das told the Business Standard BFSI Insight Summit yesterday that “private” cryptocurrencies (i.e. all those we know and love) are backed by nothing, are purely tools for speculation, and carry “inherent risk” for financial stability. Das’s viewpoint isn’t shared by other central banks however, who see crypto as a small fish in a big pond.
Crypto Serves No Purpose, Says Das
Das was speaking at the summit when he broached the subject of cryptocurrencies:
They have no underlying value. They have huge inherent risks for our macroeconomic and financial stability. I am yet to hear any credible argument about what public good or what public purpose it serves.
He went on to say that would approve of a full-scale ban in India, saying, “if it is allowed to grow, if you try to regulate it and allow it to grow, please mark my words, the next financial crisis will come from private cryptocurrencies.” Naturally, Das highlighted the FTX catastrophe as an example of how dangerous crypto can be, stating that, “I don’t think we need to say anything more about our stand after the developments over the last one year, including the latest episode around FTX.”
Das’s comments come a year after Prime Minister Narendra Modi warned that Bitcoin could spoil the nation’s youth, and underlines India’s fractious relationship with the sector.
Not All Central Banks Agree
Das’ views are shared by some leading financial figures but not by all. As an example of the divided thinking, Sir Jon Cunliffe, deputy governor for financial stability at the Bank of England (BoE), warned last year that the crypto sector could trigger financial instability just six days after the Bank of England itself stated that the risk posed by cryptocurrency markets to the UK’s levels of financial stability were “currently limited”.
Indeed, it is hard to see how crypto will be the cause of the next financial crisis when the market cap of the entire sector hit just $3 trillion at its peak last year and is currently just $770 billion, over 15x smaller than that of gold.
