Cryptocurrencies are clear danger to financial systems, says RBI Governor
Reserve Bank Governor Shaktikanta Das on Thursday called cryptocurrencies a “clear danger” and said anything that derives value on the basis of pretending, without any underlying, is not just speculation under a fancy name.
The government is in the process of finalizing a consultation document on cryptocurrencies after collecting input from various stakeholders and institutions.
The Reserve Bank of India (RBI) has flagged concerns over cryptocurrencies, which are considered a highly speculative asset.
In the foreword to the 25th issue of the Financial Stability Report (FSR) released on Thursday, Das also said that as the financial system becomes more digitalized, cyber risks are increasing and require special attention.
“We need to be aware of the risks emerging on the horizon. Cryptocurrencies are an obvious danger. Anything that extracts value on the basis of pretending, without any underlying, is just speculation under a fancy name,” Das said.
In recent weeks, cryptocurrencies, which are not backed by any underlying asset, have experienced massive volatility amid global uncertainties.
RBI first issued a circular regarding cryptocurrencies in 2018 and prohibited entities regulated by it from trading in such instruments. However, in early 2020, the Supreme Court overturned the circular.
While regulatory clarity has yet to emerge regarding the cryptocurrency space in the country, the government is working to finalize a consultation paper on cryptocurrencies with inputs from various stakeholders and institutions, including the World Bank and the IMF.
In the foreword to the FSR, Das also said that while technology has underpinned the reach of the financial sector and its benefits must be fully exploited, its potential to disrupt financial stability must be avoided.
“As the financial system becomes increasingly digitized, cyber risks are increasing and require special attention,” he noted.
Regarding the economy, he said it was skewed by global fallout and geopolitical tensions.
The Indian financial system demonstrates an underlying robustness and resilience to withstand these shocks. “Our endeavor is to address all challenges, external and internal, with solid and innovative solutions for the Indian financial system,” he added.
A notable feature of the current situation is the overall resilience of Indian financial institutions, which should support the economy as it strengthens its outlook. This reflects a combination of good governance and risk management practices, he said.
According to him, the results of the stress tests presented in the FSR demonstrate that banks are well positioned to withstand even severe stress scenarios without falling below the minimum capital requirement.
He also said the corporate sector is deleveraged with stronger results and the external sector is well protected to withstand ongoing terms-of-trade shocks and portfolio outflows.
“In a dynamic environment with considerable uncertainty, we have been proactive and agile in our policy responses. We have calibrated our actions to the needs of the day and have worked to preserve macroeconomic and financial stability to ensure growth. sustainable and inclusive,” he said. said.
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