India’s central bank governor said on Wednesday that he is not at war with cryptocurrencies, but argued that cryptocurrencies have no underlying fundamentals and their use should be banned.
RBI Governor Shaktikanta Das told a room full of banking executives and lawmakers that crypto has a huge inherent risk to the nation’s macroeconomics and stability. “After the development of the last year, including the latest episode surrounding FTX, I don’t think we need to say anything more. Time has proven that crypto is worth as much as it is today.”
“The change in value in any so-called commodity is the operation of the market. But unlike any other asset or product, our main concern with crypto is that it has no underlying. I think cryptocurrency or private cryptocurrency is a trendy way to describe what is otherwise a 100% for-profit business,” Das said.
Das said that crypto owes its origin 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 is of the opinion that encryption 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 among the nations that have adopted a strict approach in handling cryptocurrencies. Earlier this year, it began taxing virtual currencies, imposing a 30% tax on profits and a 1% discount on every crypto transaction.
The nation’s move, alongside the market downturn, has severely depleted the trading of local exchanges CoinSwitch Kuber, backed by Sequoia India and Andreessen Horowitz, and CoinDCX, backed by Pantera, in the country.
Changpeng “CZ” Zhao, founder and CEO of the world’s largest crypto exchange Binance, told TechCrunch in a recent interview that the company doesn’t see India as a “very crypto-friendly environment.” He said the company tries to convey its concerns to the local authority about local taxation, but argued that tax policies usually take a long time to change.
“Binance is going to countries where the regulations are pro-crypto and pro-business. We don’t go to countries where we won’t have a viable business — or any business, 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 pulled the service amid regulatory fears. Coinbase co-founder and CEO Brian Armstrong said in May that the company disabled Coinbase’s support for local UPI payments “due to some informal pressure from [central bank] Reserve Bank of India.”
“Crypto closed 2021 with the narrative that finance as we know it was slow, inefficient and clumsy. Defi and DAO were the path forward. Cryptocurrency prices, in their own parlance, were rising and investors were HODLing. Since May 2022, cryptocurrencies have lost some of their luster – two-thirds of their value. The failure of some entities caused the ecosystem to disintegrate,” T. Rabi Sankar, Deputy Governor of the RBI, who once likened crypto to a tulip and Ponzi scheme, said on Wednesday.
“The technology that was heralded as the end of government, and regulators and intermediaries — the underlying philosophy of crypto — is now frantically seeking to regulate itself,” he said.