India’s central bank governor said on Wednesday that he is not at war with cryptocurrencies, but argued that cryptocurrencies have no fundamental basis and their use should be banned.
RBI Governor Shaktikanta Das told a room full of banking executives and lawmakers that cryptocurrencies have a huge inherent risk to the nation’s macroeconomics and stability. “After the developments of the last year, including the latest episode surrounding FTX, I don’t think we need to say anything more. Time has shown that crypto is worth what it is worth today.”
“The change in value in any so-called product is a function of the market. But unlike any other asset or product, our main concern with crypto is that it has no basis. I think crypto or private cryptocurrency is a modern way to describe what is otherwise a 100% speculative activity,” said Das.
Das said that cryptocurrencies owe their origins to the idea of circumventing or disrupting the existing financial system. “They don’t believe in a central bank, they don’t believe in a regulated financial world. I have yet to hear a good argument about what public purpose it serves,” he said, adding that he thinks cryptocurrencies should be banned.
“It should be banned because if it is allowed to grow… say it is regulated and allowed to grow… please mark my words that the next financial crisis will come from private cryptocurrencies,” he said.
India is among the nations that have taken a strict approach to handling cryptocurrencies. Earlier this year, it began taxing virtual currencies, charging a 30% tax on winnings and a 1% deduction on every crypto transaction.
This national move, along with a market slump, has severely depleted transactions that local exchanges CoinSwitch Kuber, backed by Sequoia India and Andreessen Horowitz, and CoinDCX, backed by Pantera, process 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 communicate its concerns about local taxation to local authorities, but argued that tax policy usually takes a long time to change.
“Binance is going to countries where the regulations are for crypto and for business. We’re not going to countries where we won’t have a viable business — or any business, whether we go or not,” he said.
Coinbase, which backed both CoinDCX and CoinSwitch Kuber, launched its crypto platform in the country earlier this year but quickly pulled the plug on regulatory fears. Coinbase co-founder and CEO Brian Armstrong said in May that the company disabled Coinbase’s support for local infra UPI payments “due to some informal pressure from [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 forward. Cryptocurrency prices, in their own jargon, have been rising, and investors are HODLing. Since May 2022, cryptocurrencies have lost some of their luster — two-thirds of their value. The failure of some entities has caused the ecosystem to collapse,” T. Rabi Sankar, Deputy Governor of the RBI, who once compared the cryptocurrency to a tulip and a Ponzi scheme, said on Wednesday.
“The technology that was heralded as the end of government, regulators and middlemen — the core philosophy of crypto — is now clamoring to be regulated,” he said.