Kevin Helms
An Austrian economics student, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the intersection of economics and cryptography.
Cryptocurrencies are a clear danger – financial stability risk is likely to grow – regulation of Bitcoin news
India’s central bank, the Reserve Bank of India (RBI), sees cryptocurrencies as “a clear danger”. However, the financial stability risk posed by cryptocurrencies currently appears to be “limited.”
RBI on Crypto’s danger and financial stability risk
The Reserve Bank of India (RBI) released the 25th edition of its Financial Stability Report (FSR) on Thursday. RBI Governor Shaktikanta Das wrote:
Cryptocurrencies are a clear danger. Anything that gains value based on make believe, without any underlying, is just speculation under a sophisticated name.
The RBI chief further said: “Although technology has supported the reach of the financial sector and its benefits must be fully exploited, its potential to disrupt financial stability must be protected against.”
The Bank of India’s report explores financial stability risk posed by cryptocurrencies, citing various studies, including the work of the Financial Stability Board (FSB). The reports say:
The risk from cryptocurrencies to financial stability appears to be limited at the moment as the total size is small (0.4 per cent of global financial assets).
In addition, it notes that cryptos “interconnection with the traditional financial system is limited.”
Nevertheless, the report adds:
However, the associated risks are likely to grow as these assets and the ecosystem that supports their growth develop.
The report also discusses the digital currencies of CBDCs and central banks (CBDCs). The RBI noted: “The risk from stablecoins claiming to maintain a stable value against existing fiat currencies requires close monitoring, in particular.”
The RBI statement on financial stability and crypto reflects the comments on the subject by Christine Lagarde, President of the European Central Bank (ECB). “Crypto-assets and decentralized finance (defi) have the potential to pose a real risk to financial stability,” she said in June. “This will be especially the case if the rapid growth of markets and services for cryptocurrencies continues … and the link with both the traditional financial sector and the broader economy intensifies.”
What do you think of the comments from the Indian central bank? Let us know in the comments section below.
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