The Reserve Bank of India (RBI), India’s central bank, views cryptocurrencies as a “clear danger.” However, the financial stability risk posed by crypto assets currently appears to be “limited.”
RBI on Crypto’s Danger and Financial Stability Risks
The Reserve Bank of India (RBI) on Thursday released the 25th issue of its Financial Stability Report (FSR), which is a report on the financial stability of cryptocurrencies and the risks they pose to the financial system. rbi Governor Shaktikanta Das wrote:
Cryptocurrencies are clearly dangerous. Anything that has no foundation and derives value based on make-believe is mere speculation under a sophisticated name.
The RBI Director further opined. “While technology supports the development of the financial sector and its benefits must be fully exploited, we must be wary of its potential to disrupt financial stability.”
The Indian central bank report examines the financial stability risks posed by crypto assets, citing various studies, including work by the Financial Stability Board (FSB). The report states.
The risk to financial stability from crypto assets currently appears to be limited due to their small overall size (0.4% of global financial assets).
In addition, they note that crypto’s “interconnectivity with the traditional financial system is limited.”
Nevertheless, the report adds.
However, as these assets and the ecosystems that support their growth evolve, the associated risks are likely to grow.
The report also discusses stablecoins and central bank digital currencies (CBDCs), RBI notes.” Risks from stablecoins, which claim to maintain stable value against existing fiat currencies, require particularly close monitoring.”
The RBI statement on financial stability and crypto echoes comments on this topic by European Central Bank (ECB) President Christine Lagarde.” Crypto assets and decentralized finance (defi) have the potential to pose real risks to financial stability,” she said in June.” The rapid growth of crypto asset markets and services continues… This will be especially true if there is enhanced interconnection with both the traditional financial sector and the broader economy.”
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