The governor of India’s central bank said on Wednesday that it is not at war with crypto, but asserted that cryptocurrencies have no underlying fundamentals and their use should be banned.
RBI Governor Shaktikanta Das told a roomful of bank executives and lawmakers that crypto poses a huge inherent risk to the nation’s macroeconomic and stability. “After the development over the past year, including the latest installment around FTX, I don’t think we need to say more. Time has proven that crypto is worth what it is worth today.”
“Value change in any so-called product is the function of the market. But unlike any other asset or product, our main concern with crypto is that it doesn’t have any underlying asset. I think crypto or private cryptocurrency is a fashionable way of describing what is otherwise a 100% speculative activity,” said Das.
Das said crypto owes its origins to the idea that it bypasses or breaks the existing financial system. “They don’t believe in the 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 believes crypto 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 one of the countries that have taken a strict approach when dealing with cryptocurrencies. Earlier this year, it began taxing virtual currencies, charging a 30% tax on profits and a 1% deduction on each crypto transaction.
The relocation of the country, in addition to the downturn in the market, has severely depleted the transactions that local exchanges CoinSwitch Kuber, backed by Sequoia India and Andreessen Horowitz, and CoinDCX, backed by Pantera, are processing in the country.
Changpeng “CZ” Zhao, founder and CEO of the world’s largest crypto exchange Binance, told ExamPaper in a recent interview that the company doesn’t see India as a “very crypto-friendly environment.” He said the company is trying to convey its concerns about local taxation to the local government, but claimed that tax policies typically take a long time to change.
“Binance goes to countries where the regulations are pro-crypto and pro-business. We’re not going to countries where we’re not going to have a sustainable business — or any business for that matter whether we go or not,” he said.
Coinbase, which has backed both CoinDCX and CoinSwitch Kuber, launched its crypto platform in the country earlier this year, but quickly rolled back the service due to a regulatory scare. Coinbase co-founder and CEO Brian Armstrong said in May that the company has turned off Coinbase support for local payments infra UPI “due to some informal pressure from the [central bank] Reserve Bank of India.”
“Crypto ended 2021 with the story that finance as we know it was slow, inefficient and clumsy. Defi and DAOs were the way forward. Crypto prices, in their own jargon, were mooning and investors were HODLing. Since May 2022, cryptos have lost some of the luster – two-thirds of their value. The failure of some entities has caused the ecosystem to fall apart,” RBI vice governor T. Rabi Sankar, who once compared crypto to tulip and Ponzi scheme, said Wednesday.
“The technology that was heralded as the end of government, and regulators and intermediaries – the underlying philosophy of crypto – is now frantically trying to be regulated,” he said.