RBI Claims Cryptocurrencies Will Invite the Next Deflation
If private cryptocurrencies are allowed to grow, they will cause the next financial crisis
The next financial crisis, according to India’s central bank Governor Shaktikanta Das, will be caused by “private cryptocurrencies” if they are allowed to be regulated rather than outright banned. Das spoke at the Business Standard BFSI Insight Summit. They pose significant threats to our macroeconomic and financial stability.
People familiar with the central bank’s operations that the term “private cryptocurrencies” is being used to distinguish between public cryptocurrencies like India’s CBDC and cryptocurrencies like bitcoin and ether that private players issue. The governor of the Reserve Bank of India (RBI) has previously stated that cryptocurrencies should be prohibited. These remarks are significant because the country currently holds the presidency of the Group of 20 (G-20), giving it the authority to set the agenda.
Indian Finance Minister Nirmala Sitharaman has stated that regulating cryptocurrency assets should be a global priority and will be a major topic of discussion during India’s G-20 presidency.
The RBI’s entourage of more than 20 people has been attending these G-20 meetings in India over the last few days, where different nations are presenting their views on how to regulate the space. The governor’s remarks also come when the RBI is attempting to raise awareness about its CBDC, the e-rupee or digital rupee, and is being asked whether CBDCs compete with private cryptocurrencies. Previously, Das stated that the Indian central bank’s warnings convinced people to avoid cryptocurrencies.
India, a country that has sought to ban or severely restrict crypto usage within its borders at times, has taken over the presidency of the Group of 20 the intergovernmental forum of some of the world’s largest economies – as of December 1, just as much of the world is debating whether stricter regulation of the industry is required.
India will be in charge of shaping the group’s agenda for the next year as it takes over the group, which includes 19 nations and the European Union as a bloc. Prime Minister Narendra Modi is no stranger to the world of cryptocurrency. He has previously called for global cooperation to address the challenges posed by cryptocurrencies, stating that the technology “makes decisions taken by one country insufficient to meet the challenges.” Next year, September 9-10, India and its prime minister will host the 18th G-20 summit in New Delhi. The prioritization of developing globally coordinated crypto rules reflects a renewed urgency for tighter regulations in the aftermath of the collapse of FTX.
During its G-20 presidency, India is looking to the International Monetary Fund (IMF) to lead consultations on how to regulate crypto assets, according to two people familiar with the matter.
This could be a strategic geopolitical shift away from the Financial Stability Board (FSB), the international financial watchdog that has been the de facto leader in rule-making for the past decade. The FSB recently proposed comprehensive international crypto rules.
The chair of its crypto working group urged authorities to agree on global industry norms while also warning that cryptocurrency would soon threaten global financial stability. The IMF is a member of the FSB, but the FSB, established after the 2009 G-20 London Summit, is seen as closer to the G-20 and the US at a time of Russia’s war against Ukraine a person frequently consulted by India’s Finance Ministry on policy matters. India might not want to alienate its old ally, Russia. Instead, a gradual shift toward the IMF may be perceived as more neutral.