Key Takeaways
Indian central bank governor Shaktikanta Das has sounded the alarm on the risks that crypto poses to financial stability and sovereignty.
In a speech at the Peterson Institute for International Economics’s Macro 2024 event, Das reiterated his concerns about the dangers of legitimizing crypto use and called for international cooperation to regulate the nascent market.
Das expressed reservations about allowing crypto to operate alongside traditional financial institutions, arguing that they were created to bypass India’s existing system.
“We have to understand the origin of cryptocurrencies. The origin was to bypass the system. Cryptocurrencies have all the qualities of money.”
The governor warned that if crypto is allowed to grow unchecked in India, some sectors of the economy may fall outside the central bank’s authority, leading to potential monetary instability risks.
“If the central bank loses control of the money supply in the economy, how does a central bank control inflation by squeezing the money supply or by losing the money supply in times of crisis?” he asked.
Das reaffirmed that India’s central bank views crypto as a big risk, emphasizing the need for international collaboration on crypto regulation.
Das cautioned that the risks associated with crypto legalization are not limited to individual countries.
“There has to be an international understanding because the transactions are cross-country,” he said.
India has been at the forefront of raising concerns about cryptocurrencies, and Das noted that the topic was a focus of discussion during the recent G20 summit in India.
“In the G20 under the Indian presidency, there was an agreement to develop an international understanding with regard to how to deal with this whole crypto ecosystem. Some progress has been made in this regard.”
Das’ comments reflect the broader government sentiment in India, which has been wary of crypto. The finance ministry and Prime Minister Narendra Modi have also called for international cooperation on crypto regulation.
Despite India’s rapid adoption of cryptocurrencies , the lack of regulatory clarity and government support has led to an exodus of leading crypto firms and institutional traders to nearby countries like Dubai.
The Indian government’s 30% tax on crypto transactions has also been a major deterrent to growth in the sector.