Private crypto coins undermine financial stability: RBI note

NEW DELHI: A Reserve Bank of India (RBI) concept note on central bank digital currency (CBDC) has flagged risks posed by private cryptocurrencies saying these digital assets undermine India’s financial and macroeconomic stability because of their negative consequences for the financial sector.
“Further, a wider proliferation of cryptocurrencies has the potential to diminish monetary authorities’ power to determine and regulate monetary policy and the monetary system of the country, which could pose a serious challenge to the stability of the country’s financial system.
The central bank has consistently expressed its opposition to private cryptocurrencies and RBI Governor Shaktikanta Das had said in June that cryptocurrencies are a clear danger and anything that derives value based on make-believe, without any underlying value is just speculation under a sophisticated name.


Authorities are working on measures to regulate cryptocurrencies but the view has been that global cooperation is needed on regulating these entities as measures taken by one country would not be sufficient to regulate them. The issue could figure in next year’s G20 deliberations under India’s presidency of the group.
“The inherent design of cryptocurrencies is more geared to bypass the established and regulated intermediation and control arrangements that play a crucial role of ensuring integrity and stability of the monetary and financial ecosystem,” RBI’s note released on Friday said.
It said CBDCs are the next step in the evolutionary progression of sovereign currency. Referred to as e (digital Rupee) in India, it is substantially not different from bank notes, but being digital it is likely to be easier, faster and cheaper. It also has all the transactional benefits of other forms of digital money, according to the central bank.
RBI will soon commence limited pilot launches of e for specific use.

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