RBI Governor says, Crypto’s clear danger

By Our Special Correspondent

Reserve Bank Governor Shaktikanta Das on Thursday described crypto-currencies as a "clear risk" and said anything that derives value based on make-believe without any underlying basis is mere speculation in the name of sophistication.

The government is in the process of finalizing a consultation paper on crypto currencies after collecting inputs from various shareholders and firms.

The Reserve Bank of India (RBI) is flagging concerns about crypto currencies, which are considered the most speculative assets.

In the preface to the 25th edition of the Financial Stability Report (FSR) released on Thursday, Das said cyber risks are on the rise and need special attention as the economy becomes more digitized.

"We need to be mindful of emerging risks on the horizon. Crypto currencies are an obvious risk. Anything that gains value based on belief, without any underlying basis, is just speculation in a fancy name," Das said.

In recent weeks, crypto currencies, which do not support any underlying value, have experienced massive volatility amid global uncertainties.

The RBI issued a circular on crypto currencies for the first time in 2018 and banned companies regulated by it from dealing with such instruments. However, in early 2020, the Supreme Court struck down the circular.

Although regulatory clarity regarding the place of crypto currency in the country is yet to emerge, the government is working to finalize a consultation paper on crypto currencies with inputs from various stakeholders and institutions, including the World Bank and the IMF.

In the FSR foreword, Das said that technology supported the financial sector and that it should make full use of its benefits and maintain its ability to disrupt financial stability.

"As the economy becomes more and more digital, cyber risks are on the rise and need special attention," he said.

The system exhibits inherent robustness and resilience to withstand these shocks. As for the economy, he said, it is skewed towards global spillovers and geopolitical tensions. Indian Finance

"Our endeavor is to meet all external and internal challenges with strength and innovative solutions for the Indian economy," he added.

A notable feature of the current situation is the overall resilience of Indian financial institutions, which should keep the economy in good standing by strengthening its prospects. He said it reflects a combination of governance and risk management practices.

According to him, the stress test results presented in the FSR prove that banks are well able to withstand even extreme stressful situations without falling short of the minimum capital requirement.

He also said that the corporate sector was weakening with more strong bottom lines and the external sector was well buffered to withstand the ongoing trade shocks and portfolio outflows.

"In a dynamic environment of considerable uncertainty, we are taking proactive and proactive steps in our policy responses. We are calibrating our actions on an hourly basis and striving to maintain macroeconomic and economic stability to ensure sustainable and inclusive growth," he said.