Shaktikanta Das, the Governor of the Reserve Bank of India (RBI) expressed on Thursday, at an event organized by The Indian Express and Financial Times, that the central bank continues to have ‘serious and major’ concerns regarding cryptocurrencies such as Bitcoin, reported PTI. This concern was conveyed to the government of India. However, Das said that the final call on the issue falls to the government and that they have to decide what to do on the matter, according to the report. Das added that the RBI would like to have credible explanations and answers as to the value that such instruments (cryptocurrencies) can get the Indian economy.
It should be noted that cryptocurrencies are under the regulatory gaze and have been for some time now, with the government still on the fence as to whether to allow them fully or not. This is despite their obvious lack of regulation, highly complex mining processes and price volatility that make it such an unstable financial instrument. At the moment calls have been made to treat cryptocurrencies as a foreign asset according to the report.
One of the first countries to recognise Bitcoin as an official asset was El Salvador. The South American nation recognised the digital asset earlier this week on September 7, 2021. The country decided to adopt crypto as a legal tender. In the wake of this, the country has also been witnessing waves of civil unrest following the value correction of the currency by 20 per cent in a single day, reports mentioned.
Speaking at the event, Das said, “We have conveyed our serious and major concerns about cryptocurrencies to the government from a point of view of financial stability. The government will take a decision."
“I think we need more credible answers as to whether going forward, the whole private cryptocurrencies, what contribution it will make to the Indian economy going forward. I think we need to be convinced with more credible explanations and answers," he added.
The apex bank had initially banned the domestic lenders from facilitating investors’ trade in cryptocurrencies, but this was reversed after the Supreme Court struck down the order. It was alleged that some banks have resumed these services. Earlier this year in March, Das said that he had reason to believe that the government shares the concerns that were flagged by the RBI, according to the report.
On a parallel note, India has been taking steps towards its own form of a legally recognised digital rupee. Also called the Central Bank Digital Currency, the RBI is gearing up for a phased introduction of the asset. Das had mentioned last month that the digital currency would be rolled out with trial programmes by December. Unlike cryptocurrency, the Central Bank Digital Currency will be regulated. Most interestingly, it will not be an asset so to speak, but a digital reflection of the current monetary system. It will be exchangeable one-to-one with the Indian Rupee.
Cryptocurrencies on the other hand can be considered as commodities that have a set value to them, like gold or silver. That value will be uniform across the board, irrespective of the country it is being traded within, with the only factor to be considered being the currency conversion rate that would represent that value. Das had mentioned that the RBI was aiming to launch the central bank digital currency as a mass-scale digital asset. The RBI had put out a note stating that the central bank digital currency and the interest it held as an asset were universal. However, few countries have even come close to the pilot stage of launching such an endeavour.