The recent crash in cryptocurrencies, including the Terra stablecoin, has strengthened the RBI’s argument that they are speculative and pose a risk to financial stability. It has refused to acknowledge private digital tokens.
The RBI governor, Shaktikanta Das, told The Economic Times in an exclusive interview that cryptos are speculative and that “you cannot regulate nothingness.”
Cryptocurrency has no underlying. Nothingness cannot be regulated. There must be some kind of regulation. Prices can change quickly. In reality, it is purely speculative. I won’t use a harsher term than gambling, but it is a speculative activity. It has the potential to cause small and retail investors to lose money and lose faith in the financial system. There is an underlying company in share prices that are governed by company law, Das stated.
He also stated that the government will consider all viewpoints before deciding whether to regulate or prohibit cryptocurrency.
Stablecoins, such as Terra and Luna, which are thought to be less volatile, fell to record lows, rendering them worthless, as the algorithmic mechanisms failed to keep their peg to the dollar.
Many have speculated that if so-called stablecoins can take this hit, what will become of other cryptocurrencies? The fall of Terra and Luna added to the turmoil in the crypto universe.
The Reserve Bank of India has consistently opposed cryptocurrency, citing financial stability concerns. If cryptocurrency can circulate freely, central banks’ monetary policies will be less effective. Extreme price volatility and difficulty tracing transactions are two other concerns.
