Reserve Bank of India (RBI) Governor Shaktikanta Das said on Thursday that cryptocurrencies are a clear danger to the financial systems, adding that we must be mindful of the emerging risks on the horizon.
In the RBI's annual 'Financial Stability Report' (FSR) 2022, he wrote in the foreword that anything that derives value based on make-believe, without any underlying, is just speculation under a sophisticated name.
"While technology has supported the reach of the financial sector and its benefits must be fully harnessed, its potential to disrupt financial stability has to be guarded against," Das stressed.
The RBI governor has been a vocal critic of cryptocurrencies.
He recently cautioned the crypto investors, saying that "it is my duty to tell the investors who invest in cryptocurrencies to keep in mind that they are investing at their own risk and also need to keep in mind that the cryptocurrency has no underlying value, not even a tulip".
In the latest RBI report that came out on Thursday, Das said that as the financial system gets increasingly digitalised, cyber risks are growing and need special attention.
"Overall, the financial stability risks to the Indian economy are skewed towards global spillovers and geopolitical tensions. Nevertheless, the Indian financial system exhibits underlying robustness and resilience to withstand these shocks," he noted.
Finance Minister Nirmala Sitharaman has announced that the RBI will roll out the Central Bank Digital Currency (CBDC) in FY23 that will be based on Blockchain technology.
Last year, Das flagged major concerns over cryptocurrency to the government.
"Both RBI and government are committed to financial stability. We have flagged certain concerns around crypto-currencies which are being traded in the market. We have flagged certain major concerns to the government, and it is still under examination in the government and the government will come out with a decision or sooner than later," he had said.
Further in the RBI report, Das said that the prospects for the global economy are overcast by the war in Europe even as they continue to be shaped by the evolution of the Covid-19 pandemic.
"Global recovery, which was navigating multiple waves of infections and new mutations, is once again being tested by a stormy environment of military conflict and retaliatory sanctions. The risks of stagflation are rising. With no resolution visible in the near future, the need of the hour for every economy is to combat mounting inflation while factoring in the growth requirements of the economy," he explained.
A noteworthy feature of the current situation is the overall resilience of Indian financial institutions, "which should stand the economy in good stead as it strengthens its prospects", he added.