Reserve Bank of India Governor Shaktikanta Das stated on Thursday that private cryptocurrencies pose a risk to macroeconomic and financial stability.
Das stated that it was his responsibility to warn cryptocurrency investors and inform them that they were investing at their own risk. “They should remember that these cryptocurrencies have no underlying [asset], not even a tulip,” remarked the governor.
Finance Minister Nirmala Sitharaman revealed the new digital rupee will be implemented this year using blockchain technology while presenting the Union Budget on February 1. Blockchain is a distributed digital database of transactions that spans the whole network of computers.
Das stated that they are working on their blockchain project with caution and diligence. “We must consider concerns like cyber-security and counterfeiting,” he stated. “As a result, we’re proceeding cautiously and are unable to provide a deadline.”
The move was greeted favorably by cryptocurrency investors, who saw it as a step toward legitimizing their industry. Private cryptocurrencies, by any name, pose a threat to our macroeconomic and financial stability. Das warned that they will jeopardise the RBI’s ability to deal with financial and macroeconomic stability challenges.
He went on to say that it is his responsibility to warn investors, reminding them that they are doing so at their own risk. They also need to keep in mind that the cryptocurrency has no underpinning, not even a tulip, said Das, using a historical background to make a point on the worth of such products.
It’s worth noting that the 17th century’s ‘tulip mania’ is sometimes mentioned as a classic example of a financial bubble, in which the price of anything rises not because of intrinsic value, but because of investors looking to profit by selling a bulb of the exotic flower.
