February 11, 2022
By Sharan Kaur Phillora
Reserve Bank of India Governor Shaktikanta Das gave an assessment of the digital currency craze just days after the Indian government established a taxation framework for cryptocurrencies.
Here’s everything you need to know:
- “Private cryptocurrency is a huge threat to macro-economic stability and financial stability…investors should keep this in mind that they are investing at their own risk,” he told a news conference. He further added: “And these cryptocurrencies have no underlying (value) – not even a tulip.”
- The term tulip or tulipmania refers to the Dutch tulip bulb market bubble in the 1600s that became a parable of greed. The RBI has taken a strong stance against private digital currencies. Given that cryptocurrencies are designed to be traded freely and anonymously, the central bank is worried about capital controls, especially as it has a tight grip over the partially-convertible Indian rupee.
- Issues such as money laundering and terrorism financing have been raised as concerns. “Private cryptocurrency or whatever name you call is a big threat to our macroeconomic stability and financial stability,” Das said.
- To mitigate the power of cryptocurrencies, RBI is developing its own “digital rupee”, although Das declined to give a firm time frame by when it will be ready. In the budget announced in early February, Sitharaman said a central bank digital currency would be ready sometime in the next financial year that starts on April 1.
- “We are making progress on CBDCs after carefully, cautiously examining it because there are risks,” he further said. “The biggest risk is of cybersecurity and possibility of counterfeiting. We should absolutely prevent that.”
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.