India’s central banking institution, the Reserve Bank of India, (RBI), considers cryptocurrency “a clear threat.” However, it seems that the financial stability risks presented by crypto assets are currently “limited.”
Thursday’s 25th issue of the Reserve Bank of India’s Financial Stability Report (FSR), was released by the RBI. Shaktikanta Das, Governor of RBI wrote:
The clear danger of cryptocurrencies is their volatility. Any value that is derived from make-believe, with no underlying, can only be called speculation.
The RBI chief stated that technology had supported the reach and benefits of the financial sector, but it must also be fully harnessed to protect against its potential disruption to financial stability.
Report by Indian central bank on financial stability risks posed crypto assets. It cites various studies, including those by the Financial Stability Board (FSB). According to the report:
Crypto assets are currently considered to have low risk of financial instability because their overall size (0.4 percent) is very small.
It also notes that crypto’s “interconnectedness to the traditional financial system” is limited.
The report includes:
However, the associated risks will increase as the ecosystem supporting these assets evolves.
The report also covers stablecoins as well as central bank digital currencies. The RBI stated that stablecoins claim to have a stable value relative to fiat currencies need to be closely monitored.
The statement of the RBI on financial stability and cryptocurrency echos comments made by Christine Lagarde (ECB president). In June, she stated that crypto assets and decentralized financing (defi), could pose real risks to financial security. This would be especially true if crypto-asset markets continue to grow rapidly and if interconnectedness with the traditional financial sector is increased.
