Cryptos Risk India's Emerging Markets- RBI Chief's Unchanged Stance

Cryptocurrencies continue to raise concerns for emerging markets, with the Reserve Bank of India (RBI) Chief Shaktikanta Das reiterating their significant risks. Despite the growing acceptance of cryptocurrencies in other countries, Das emphasised that the RBI’s steadfast stance remains unchanged.


During a press interaction in Mumbai, Das addressed questions regarding the recent approval by the U.S. securities regulator for the first U.S.-listed exchange-traded funds (ETFs) tracking bitcoin. He clarified that the RBI maintains its cautious approach to cryptocurrencies regardless of global developments.


“The RBI’s position on this (cryptocurrencies) remains unchanged irrespective of who does what,” Das asserted, underscoring the potential risks associated with delving into the world of cryptocurrencies.


He expressed concerns about the challenges that cryptos risk India’s emerging market economies and advanced economies would face if they were to embrace cryptocurrencies, warning that such a path could lead to substantial and difficult-to-contain risks in the future.


Das has consistently highlighted the lack of underlying value in cryptocurrencies and their risks to macroeconomic and financial stability. Despite the increasing popularity of cryptocurrencies, especially Bitcoin, the RBI still needs to be aware of their potential impact on the broader economic landscape.


In contrast to cryptocurrencies, Das shed light on the positive aspects of central bank digital currencies (CBDCs), citing India’s case with the e-rupee. He emphasized that the RBI is actively enhancing the “programmability” of the e-rupee to facilitate various financial transactions, including targeted transfers to farmers.


The central bank has ambitious plans for the digital rupee, intending to pilot its use in new segments within the wholesale space. Das highlighted that the RBI achieved a significant milestone by disbursing some employee benefits through the digital rupee in December. This move helped the RBI achieve one million daily transactions by the end of 2023.


Furthermore, Das disclosed that the RBI, in collaboration with the National Payments Council of India, is in discussions with several countries regarding adopting India’s Unified Payments Interface (UPI) for cross-border transactions. This initiative aims to position India’s payments system globally and foster international collaborations.


In a broader context, Das mentioned that the RBI is closely monitoring the use of model-based artificial intelligence (AI) in lending by financial entities. This signifies the central bank’s proactive approach to staying abreast of technological advancements in the financial sector, especially in AI-driven lending.


As the finance landscape continues to evolve, Das’s remarks underscore the cautious stance of the RBI, balancing the potential benefits of technological innovations with the imperative to mitigate associated risks, particularly in the realm of cryptos risk India’s economic landscape.