The governor of India’s central bank said on Wednesday that it was not at war with crypto, but asserted that cryptocurrencies have no underlying fundamentals and their use should be banned.
RBI Governor Shaktikanta Das told a room full of banking executives and lawmakers that crypto posed a huge inherent risk to the nation’s macroeconomics and stability. “After last year’s development, including the latest episode regarding FTX, I don’t think we need to say more. Time has proven that crypto is worth what it is worth today.
“The change in value of any so-called product is the function of the market. But unlike any other asset or commodity, our primary concern with crypto is that it has no underlying. I think crypto or private cryptocurrency is a fashionable way to describe what is otherwise 100% speculative activity,” Das said.
Das said that crypto owes its origins to the idea that it circumvents or breaks the existing financial system. “They don’t believe in the central bank, they don’t believe in a regulated financial world. I haven’t heard a good argument yet about what public purpose it serves,” he said, adding that he believes crypto should be banned.
“It should be banned because if it’s allowed to grow…let’s say it’s regulated and allowed to grow…please note my words that the next financial crisis will come from private cryptocurrencies,” did he declare.
India is among the countries that have taken a strict approach to cryptocurrency management. Earlier this year, it began taxing virtual currencies, levying a 30% tax on earnings and a 1% deduction on each crypto transaction.
The country’s move, alongside the market downturn, has severely depleted local transaction exchanges CoinSwitch Kuber, backed by Sequoia India and Andreessen Horowitz, and CoinDCX, backed by Pantera, processes in the country.
Changpeng “CZ” Zhao, founder and CEO of the world’s largest crypto exchange, Binance, told TechCrunch in a recent interview that the company does not see India as a “very crypto-friendly environment”. He said the company was trying to raise concerns with the local authority about local taxation, but said tax policies usually take a long time to change.
“Binance goes to countries where the regulations are pro-crypto and pro-business. We are not going to countries where we will not have a sustainable business – or any business, whether we go or not,” he said.
Coinbase, which has backed both CoinDCX and CoinSwitch Kuber, launched its crypto platform in the country earlier this year, but quickly canceled the service amid regulatory scare. Coinbase co-founder and CEO Brian Armstrong said in May that the company had disabled Coinbase’s support for local infra UPI payments “because of some informal pressure from the [central bank] Reserve Bank of India.”
“Crypto closed 2021 with the narrative that finance as we know it was slow, inefficient and clumsy. Defi and DAO were the way to go. Crypto prices, in their own jargon, were skyrocketing and investors HODLing. Since May 2022, cryptos have lost some of their shine – two-thirds of the value. The failure of some entities has led to the collapse of the ecosystem”, T. Rabi Sankar, Deputy Governor of RBI, who compared crypto to the tulip and the Ponzi schemesaid Wednesday.
“Technology that was heralded as the end of government, regulators and intermediaries – the underlying philosophy of crypto – is now frantically seeking regulation,” he said.