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Cryptocurrencies offers risks to financial stability: RBI

Cryptocurrencies offers risks to financial stability: RBI

Reserve Bank of India (RBI) Governor Shaktikanta Das voiced strong concerns over cryptocurrencies, warning of their potential to destabilize financial and monetary systems. Speaking at the Peterson Institute for International Economics, Das argued that cryptocurrencies pose severe risks, threatening central banks’ ability to control money supply and manage inflation.

“I believe cryptocurrencies shouldn’t dominate our financial system due to the immense risks to financial and monetary stability,” Das said. He elaborated on how widespread use of private digital currencies could undermine central banks' roles in maintaining economic stability, explaining that if the RBI lost control of money supply, it would severely impact tools for controlling inflation and liquidity in crises. He stressed the need for an international consensus on cryptocurrency regulation due to their global, cross-border transactions.

Das also highlighted India’s proactive stance on this issue, noting that under its G20 presidency, India advocated for developing an international approach to address cryptocurrency risks. “India was among the first to raise concerns about cryptocurrencies,” he said, mentioning that there’s been some progress in building this global consensus but that more work remains.

Addressing the fundamental nature of cryptocurrencies, Das emphasized that private digital currencies share qualities with government-issued currency, yet they are designed to bypass regulated financial systems. He questioned whether authorities are comfortable allowing private entities to operate currencies with no government backing. “Issuing currency is a sovereign function,” he said, adding that a private currency system could destabilize the established monetary system.

Das underscored that a parallel system dominated by cryptocurrencies could fragment economic control, leading to systemic risks. In India’s case, he said, the RBI has been vocal about these dangers, calling for careful and cautious regulatory frameworks. While acknowledging that individual countries may make their own choices on regulation, he advised a strong, cautious approach globally to protect financial and economic stability.

Cryptocurrencies offers risks to financial stability: RBI

Cryptocurrencies offers risks to financial stability: RBI

Reserve Bank of India (RBI) Governor Shaktikanta Das voiced strong concerns over cryptocurrencies, warning of their potential to destabilize financial and monetary systems. Speaking at the Peterson Institute for International Economics, Das argued that cryptocurrencies pose severe risks, threatening central banks’ ability to control money supply and manage inflation.

“I believe cryptocurrencies shouldn’t dominate our financial system due to the immense risks to financial and monetary stability,” Das said. He elaborated on how widespread use of private digital currencies could undermine central banks' roles in maintaining economic stability, explaining that if the RBI lost control of money supply, it would severely impact tools for controlling inflation and liquidity in crises. He stressed the need for an international consensus on cryptocurrency regulation due to their global, cross-border transactions.

Das also highlighted India’s proactive stance on this issue, noting that under its G20 presidency, India advocated for developing an international approach to address cryptocurrency risks. “India was among the first to raise concerns about cryptocurrencies,” he said, mentioning that there’s been some progress in building this global consensus but that more work remains.

Addressing the fundamental nature of cryptocurrencies, Das emphasized that private digital currencies share qualities with government-issued currency, yet they are designed to bypass regulated financial systems. He questioned whether authorities are comfortable allowing private entities to operate currencies with no government backing. “Issuing currency is a sovereign function,” he said, adding that a private currency system could destabilize the established monetary system.

Das underscored that a parallel system dominated by cryptocurrencies could fragment economic control, leading to systemic risks. In India’s case, he said, the RBI has been vocal about these dangers, calling for careful and cautious regulatory frameworks. While acknowledging that individual countries may make their own choices on regulation, he advised a strong, cautious approach globally to protect financial and economic stability.

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