The Reserve Bank of India (RBI) Governor Shaktikanta Das has warned that cryptocurrencies, which have no underlying value, pose huge risks for emerging market economies.
Despite the US capital markets regulator approving bitcoin exchange-traded funds, Das has stated that such instruments are not necessary for India and the country sees a lot of risks associated with them. Although the US Securities and Exchange Commission has given its approval, Das has refrained from commenting on what another regulator in another country has done.
“Some people across the world might believe the cryptocurrency ‘party’ has resumed, but such instruments with no underlying value pose huge risks for emerging market economies,” said Das.
Last week, the US Securities and Exchange Commission (SEC) approved exchange-traded funds (ETFs) based on bitcoin, which caused the prices of cryptocurrencies to surge worldwide. Reserve Bank of India (RBI) Governor, Shaktikanta Das, has consistently expressed his conviction that cryptocurrencies pose a real risk to currency and monetary stability and could potentially trigger the next global financial crisis. When asked about the future of cryptocurrencies in India, Das simply replied, "very bad," before reiterating his concerns.
According to Das, some people are celebrating the resurgence of cryptocurrencies as if the party has just begun, but he argues that there are significant risks involved, particularly for emerging market economies. He believes that cryptocurrencies are associated with issues such as money laundering and terror financing and that they have no underlying asset.
India's impressive GDP growth is attributed to sustainable macroeconomic factors, but the Reserve Bank of India (RBI) is concerned about the volatile food inflation. The dynamics of food inflation are on top of the RBI's agenda at the moment as it is subject to global supply chain issues and unexpected weather events. The wild swings in food inflation over the past few months have resulted in volatility in the headline consumer price index in India. In December, the price gauge printed 170 basis points higher than the RBI's 4 per cent target. One basis point is equivalent to a hundredth of a percentage point. Governor Das pointed out that heavy rains and floods have caused an impact on vegetable price inflation in the past year. Although the RBI has no control over such factors, it has to respond to them.
Das was satisfied with the trajectory of core inflation, which excludes the volatile components of food and fuel.