While the country has launched its digital rupee, its central bank believes that private cryptocurrencies should not be developed, even by regulating them.
India’s central bank said on Wednesday that cryptocurrencies risk causing the next global financial crisis, seeing the collapse of the FTX platform as evidence of “inherent risks” in that market.
“Unlike all other commodities, our main problem with cryptocurrencies is that they have no intrinsic (value) of any kind,” said Shaktikanta Das, Governor of the Reserve Bank of India (RBI), on the occasion of an event with industrialists.
“We believe they should be banned because (…) if you try to regulate them and let them grow, please remember my words: the next financial crisis will be caused by private cryptocurrencies.”
According to him, the recent bankruptcy of FTX, a $32 billion cryptocurrency exchange platform, highlighted “the enormous risks inherent (in this sector) to our macroeconomic and financial stability.” This bankruptcy caused a stir as the overall value of the cryptocurrency market continued to fall due to the global price drop such as that of bitcoin.
FTX boss Sam Bankman-Freed was arrested Dec. 12 on charges of fraud and embezzlement. He was one of the main proponents of cryptocurrencies. He has just been extradited to the United States from the Bahamas and released on $250 million bail.
100 million crypto traders in India
Shaktikanta Das has come to the end of a particularly difficult year for India’s 100 million crypto traders, who have already been hit by a global market crash and high taxes.
Cryptocurrencies were banned in 2018 and then reintroduced two years ago in India when the sector caught fire thanks to the development of trading platforms and the support of individuals. But the introduction this year of a 30 percent tax on profits from trading “private currencies” has reduced the number of transactions by a factor of ten.
This year, RBI launched its own blockchain-based digital rupee, a technology to certify online exchanges in a country that relies less and less on fiat currency. However, Prime Minister Narendra Modi has called for stricter regulation of these private currencies to avoid funding crime and the risk of misuse among youth.