Is crypto the culprit? RBI governor links US banking crisis to digital currency – Cryptopolitan
The governor of India’s central bank, the Reserve Bank of India (RBI), has raised concerns about the risks cryptocurrencies pose to the financial system, citing the recent US banking crisis as an example.
Speaking at the 17th KP Hormis Memorial Lecture on Friday, RBI Governor Shaktikanta Das emphasized the need for robust regulators, sustainable growth and sound asset liability management.
US banking crisis shows crypto risk
Governor Das’s comments were in reference to the recent collapses of several banks in the United States, including Signature Bank and Silicon Valley Bank, which regulators closed due to financial insolvency.
The incidents have raised questions about the role of cryptocurrencies in the financial system, with some attributing the banks’ failure to their acceptance of crypto customers without adequate safeguards.
While regulators have denied any connection between the banking crisis and cryptocurrencies, Senator Elizabeth Warren (D-MA) has been vocal in her criticism of crypto-friendly banks, arguing that they pose a systemic risk to the financial system.
Governor Das echoed these concerns, warning that cryptocurrency not only threatens India’s macroeconomic and financial stability, but also undermines the RBI’s ability to regulate the country’s monetary system.
Governor Das emphasized the importance of sound asset liability management to ensure financial stability, noting that the Indian economy remains resilient despite the challenges posed by the pandemic.
He also highlighted the RBI’s commitment to sustainable growth and robust regulation, stressing the need for a collaborative approach to maintain financial stability.
This year’s governor highlights crypto risk
Governor Dass’s warnings about crypto risks come amid growing global concerns about the potential impact of digital currencies on the financial system. The RBI chief was named Governor of the Year by the Central Banking Awards 2023 on Wednesday, recognizing his leadership in managing the Indian economy through the pandemic.
But despite his achievements, Governor Das remains wary of the risks posed by cryptocurrencies, which he has previously described as a “serious concern” for the financial system. His comments at the KP Hormi Memorial Lecture reflect a growing consensus among central bankers that cryptocurrencies pose a significant threat to financial stability and should be subject to greater scrutiny and regulation.