Towards a financial crisis in India because of crypto?

The Indian central bank has launched a new attack on cryptomoney. Shaktikanta Das, the governor of this banking institution believes that cryptocurrency is based on nothing and will lead to the next financial crisis. As a result, this Reserve Bank of India (RBI) executive is calling for a ban on the use of cryptocurrencies. This statement comes as the country tests its CBDC in the four major cities of the country.

Cryptocurrency is a danger, says Indian central bank

The prolonged crypto bear market and the FTX collapse are strengthening the criticism of crypto. This week, it was the governor of the Reserve Bank of India (BRI) who gave his indictment of cryptos.

For Shaktikanta Das, cryptocurrencies pose a threat to the country’s macroeconomic and financial stability. There is no doubt that cryptocurrency will be the cause of the next financial crisis in India, he believes. Unlike the IMF and India’s economy minister who advocates regulation of the crypto sector, Shaktikanta Das wants an outright ban on crypto.

Our view is that private cryptocurrencies should be banned because if they are allowed to grow, that is, if you try to regulate them and let them grow… please mark my words, the next financial crisis will come from private cryptocurrencies.

Shaktikanta Das

The governor of the Indian central bank bases his conviction on the very nature of the crypto. For him, the digital currency is not based on anything and is a speculation putting citizens at risk. Shaktikanta Das takes as proof the current collapse of FTX.

Unlike any other asset or product, our main concern about crypto is that it has no underlying of any kind. I think the term cryptocurrency is a trendy way to describe what is otherwise a 100% speculative activity. After all the developments of the past year, including the latest episode on the build up around FTX, I don’t think we need to say anything more about our position on crypto.

Shaktikanta Das

Lost battle against crypto to promote its CBDC

The Indian central bank’s anti-crypto rhetoric is nothing new. Last August, the governor of the Reserve Bank of India said that crypto poses a danger to both its investors and the country’s overall economy. The Reserve Bank of India isn’t the only banking institution to go after crypto.

Instead of crypto, the Reserve Bank of India is offering Indians the central bank’s digital currency. Developed a few months ago, the Indian CBDC is currently in a test phase in the country’s four major cities. Unlike crypto which is decentralized, this CBDC is controlled entirely by the Reserve Bank of India.

As in several states, negative notices from the central bank are not deterring Indian crypto investors. According to a survey by cryptocurrency exchange Kucoin published in June 2022, nearly 115 million Indians hold crypto. This represents 15% of the country’s working population (18 to 60 years old). Unlike the central bank, these Indians see bitcoin as the future of Finance.

Like the governor of the Indian central bank, several world leaders have already banned crypto. These restrictions have never led to the desired results. On the contrary, following the example of Nigeria, criminalizing crypto strengthens its adoption. You might as well regulate crypto as ban it with the assurance that you won’t succeed.