Reserve Bank of India (RBI) Governor Shaktikanta Das has once again expressed grave concerns over the rising popularity of cryptocurrencies, emphasizing the risks they pose to financial and monetary stability. Speaking at the Peterson Institute for International Economics, a think-tank based in Washington, Das reiterated his strong stance against the integration of cryptocurrencies into the mainstream financial system, warning that they could erode the central bank’s control over the economy.
‘I believe that cryptocurrencies should not be allowed to dominate the financial system. They pose huge financial and monetary stability risks, and they threaten the banking sector. If central banks lose control of money supply, it could undermine liquidity and the ability to manage inflation during crises,’ Das said during his appearance on Friday.
The governor’s comments come amid ongoing global discussions on how to regulate the crypto ecosystem. India, which raised early concerns about the potential dangers of cryptocurrencies, has been a vocal advocate for developing an international framework. Under its G20 presidency, India led efforts to establish a global understanding of how to address the risks associated with crypto assets.
‘There has to be international coordination on how to handle crypto, given that transactions are cross-border. We see it as a significant threat, and governments are increasingly aware of the potential downside risks,’ Das added.
Das’ position underscores his long-standing belief that the issuance of currency is a sovereign function. Allowing privately issued cryptocurrencies to operate alongside fiat currency, he argued, would undermine the central bank’s authority and could lead to significant instability in both the financial and monetary systems.
Inflation Risks and Rate Cuts
In addition to addressing cryptocurrencies, Governor Das commented on the current inflationary trends in India. While prices have started to moderate, he warned of continued upside risks from unexpected weather-related events, geopolitical tensions, and supply bottlenecks.
“Inflation is moderating in India, but we cannot take this for granted. There are still risks of another spike in prices, particularly due to external factors. We remain vigilant,” he said.
Das also dismissed the possibility of an interest rate cut in the near term, calling any move to reduce rates ‘premature and risky.’ His remarks came shortly after India’s Consumer Price Index (CPI) rose to 5.65% in September, with October inflation likely to remain elevated.
‘The markets may have been expecting a 25 basis points rate cut in December, but cutting rates now would be too risky,’ Das explained, emphasizing the need for careful management of monetary policy as inflationary pressures persist.
Despite these concerns, the governor noted that India’s economy is expanding at a healthy pace, with the balance between growth and inflation remaining well-poised. ‘Overall, the financial sector remains sound and resilient, but we are certainly not complacent amid a rapidly changing environment,’ Das concluded.
Global Crypto Regulatory Discussions Continue
With the rise of digital assets becoming a global issue, Das urged for more work to be done on creating a comprehensive regulatory framework to manage cryptocurrencies. While acknowledging the progress made during India’s G20 presidency, Das emphasized that more needs to be done to mitigate the risks associated with the burgeoning crypto sector.
‘Cryptocurrencies have all the qualities of money, but we must ask ourselves—are we comfortable with privately issued currencies operating alongside fiat currencies? This is a critical question for central banks and governments globally,’ he said, stressing the importance of keeping monetary policy within the sovereign domain.
As discussions on the future of digital currencies continue, Das’ clear stance adds weight to the growing call for robust regulation of crypto assets to prevent potential disruptions in global financial systems.
