Private Cryptos Could Cause Next Financial Crisis: Reserve Bank Of India Chief

The Reserve Bank of India Chief, Shaktikanta Das, has warned that cryptocurrencies pose a huge inherent risk, if permitted to grow.

Addressing banking executives and lawmakers Wednesday at the BFSI Insight Summit 2022, Das noted that private cryptos could be the cause of the next financial crisis, and that cryptos pose risk to the macroeconomic and financial stability of the nation.

"After the development of the last one year, including the latest episode surrounding FTX, I don't think we need to say anything more," Das noted.

He said the central bank has been consistently pointing out cryptos have "huge inherent risks."

"It should be prohibited because if it is allowed to grow, say it's regulated and allowed to grow... please mark my words that the next financial crisis will come from private cryptocurrencies," he continued.

The valuation of private cryptocurrencies shrunk from $190 billion to $140 billion, and Das said there was no underlying value for the market-determined price.

"Change in value 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 whatsoever. I think crypto or private cryptocurrency is a fashionable way of describing what is otherwise a 100% speculative activity," the central bank head noted.

India has been taking stringent approaches in handling cryptocurrencies. Early this year, the country's Finance Minister Nirmala Sitharaman announced taxing digital currencies, levying a 30% tax on the gains and a 1% deduction on each crypto transaction.