RBI Governor Shaktikanta Das Expresses Concerns Over Cryptocurrency Risks in Emerging Markets
By [Errraand News]
Date: [18/01/2024]
In a notable statement at the World Economic Forum in Davos, Reserve Bank of India (RBI) Governor Shaktikanta Das voiced his apprehensions about the risks associated with cryptocurrencies, particularly their impact on emerging market economies. Das highlighted concerns over the lack of underlying value in instruments like bitcoin, emphasizing their potential threat to currency and monetary stability.
Das underscored the need for each country’s regulator to make informed decisions tailored to their specific circumstances. He drew attention to the recent approval of bitcoin exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC), causing a global surge in cryptocurrency prices. Despite this development, Das maintained that India, as a nation, must carefully assess the risks involved rather than blindly adopting measures implemented elsewhere.
One of the primary concerns expressed by Das is the potential for money laundering and terror financing associated with cryptocurrencies. He cautioned against underestimating the substantial risks these instruments pose to emerging market economies. This perspective aligns with Das’s consistent stance over the years, emphasizing the tangible threat that cryptocurrencies pose to currency and monetary stability.
In response to the SEC’s approval of bitcoin ETFs, Das reiterated the importance of prudence, stating, “So far as India is concerned, we see a lot of risks, and it is not necessary for us to simply adopt what somebody else does.” His remarks highlighted the need for a cautious approach that considers the unique economic landscape and regulatory requirements of India.
Das expressed reservations about the recent resurgence of cryptocurrencies, cautioning against celebratory sentiments given their history of volatility and market collapses. Responding to a query about the future of cryptocurrencies in India, Das succinctly stated, “very bad,” underscoring the challenges and risks he associates with their widespread adoption.
Beyond the cryptocurrency discussion, Das addressed the issue of food inflation in India. Despite acknowledging the country’s robust GDP growth, he expressed concern about the volatile nature of food prices, attributing this volatility to global supply chain issues and unexpected weather events. Das highlighted the impact of heavy rains and floods on vegetable prices in the past year, emphasizing the need for the central bank to respond to such external factors.
While food inflation poses challenges, Das expressed satisfaction with the trajectory of core inflation, which excludes volatile food and fuel components. This nuanced perspective reflects Das’s holistic approach to economic challenges, acknowledging both positive and concerning aspects while emphasizing the importance of prudent decision-making.
As the global landscape evolves, particularly in the realm of cryptocurrencies, Das’s cautious stance reflects the complexity and potential risks associated with these digital assets. The RBI governor’s remarks underline the critical role regulators play in safeguarding the stability of emerging market economies in the face of evolving financial technologies.