Reserve Bank of India Governor Shaktikanta Das on Thursday, February 10, made it clear that private cryptocurrencies are a threat to macroeconomic and financial stability, and undermine its ability to deal with challenges on the two fronts. Cautioning investors, the governor said such assets have no underlying whatsoever, not even a tulip.
The comments are a reiteration of institutional concerns on such assets expressed earlier but assume significance because they come days after the Union Budget put a 30% tax on gains made on such assets. The crypto stakeholders had welcomed the move as one which legitimises their trade.
“Private cryptocurrencies or whatever name you call it are a threat to our macroeconomic stability and financial stability. They will undermine the RBI's ability to deal with issues of financial stability and macroeconomic stability,” Das told reporters. He added that it is his duty to caution investors, and told them to keep in mind that they are investing at their own risk.
Using a historical context to make a point on the value of such instruments, Das said, They also need to keep in mind that the cryptocurrency has no underlying value, not even a tulip .
It can be noted that the 'tulip mania' of the 17th century is often cited as a classic example of a financial bubble, where the price of something goes up, not due to intrinsic value but because of speculators wanting to make a profit by selling a bulb of the exotic flower.
In addition, the RBI said it does not have an exact timeline on when a Central Bank Digital Currency (CBDC) but will happen in FY23 financial year. The RBI Governor also said that there will be no difference between the digital rupee and the normal rupee.
“Digital rupee will be exactly like normal, physical rupee. It will be 1-to-1 convertible. Only it will be digital in nature. Like normal rupee is kept in your purse or pocket, the digital rupee will be kept in your cell phone device. The difference between digital rupee and private cryptocurrencies is that the digital rupee will be issued by the RBI,” RBI Deputy Governor T Rabi Sankar said.