Cryptocurrencies are clear danger to financial systems, says RBI Governor

Reserve Bank Governor Shaktikanta Das on Thursday called cryptocurrencies a “clear danger” and said anything that derives value on the basis of pretending, without any underlying, is not just speculation under a fancy name.

The government is in the process of finalizing a consultation document on cryptocurrencies after collecting input from various stakeholders and institutions.

The Reserve Bank of India (RBI) has flagged concerns over cryptocurrencies, which are considered a highly speculative asset.

In the foreword to the 25th issue of the Financial Stability Report (FSR) released on Thursday, Das also said that as the financial system becomes more digitalized, cyber risks are increasing and require special attention.

“We need to be aware of the risks emerging on the horizon. Cryptocurrencies are an obvious danger. Anything that extracts value on the basis of pretending, without any underlying, is just speculation under a fancy name,” Das said.

In recent weeks, cryptocurrencies, which are not backed by any underlying asset, have experienced massive volatility amid global uncertainties.

RBI first issued a circular regarding cryptocurrencies in 2018 and prohibited entities regulated by it from trading in such instruments. However, in early 2020, the Supreme Court overturned the circular.

While regulatory clarity has yet to emerge regarding the cryptocurrency space in the country, the government is working to finalize a consultation paper on cryptocurrencies with inputs from various stakeholders and institutions, including the World Bank and the IMF.

In the foreword to the FSR, Das also said that while technology has underpinned the reach of the financial sector and its benefits must be fully exploited, its potential to disrupt financial stability must be avoided.

“As the financial system becomes increasingly digitized, cyber risks are increasing and require special attention,” he noted.

Regarding the economy, he said it was skewed by global fallout and geopolitical tensions.

The Indian financial system demonstrates an underlying robustness and resilience to withstand these shocks. “Our endeavor is to address all challenges, external and internal, with solid and innovative solutions for the Indian financial system,” he added.

A notable feature of the current situation is the overall resilience of Indian financial institutions, which should support the economy as it strengthens its outlook. This reflects a combination of good governance and risk management practices, he said.

According to him, the results of the stress tests presented in the FSR demonstrate that banks are well positioned to withstand even severe stress scenarios without falling below the minimum capital requirement.

He also said the corporate sector is deleveraged with stronger results and the external sector is well protected to withstand ongoing terms-of-trade shocks and portfolio outflows.

“In a dynamic environment with considerable uncertainty, we have been proactive and agile in our policy responses. We have calibrated our actions to the needs of the day and have worked to preserve macroeconomic and financial stability to ensure growth. sustainable and inclusive,” he said. said.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear reader,

Business Standard has always endeavored to provide up-to-date information and commentary on developments that matter to you and that have wider political and economic implications for the country and the world. Your constant encouragement and feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these challenging times stemming from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative opinions and incisive commentary on relevant topical issues.
However, we have a request.

As we battle the economic impact of the pandemic, we need your support even more so that we can continue to bring you more great content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscriptions to our online content can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism we are committed to.

Support quality journalism and subscribe to Business Standard.

digital editor

About Keith Johnson

Check Also

Freddie Steward has established himself as England’s first name on the team sheet

Steward clawed back a long clearance and passed Kazuki Himeno, drawing in two more tacklers …