Cryptocurrencies Clear Danger, Be Mindful of Emerging Cyber Risks In Financial System: RBI Governor Shaktikanta Das

MUMBAI: Dubbing cryptocurrencies like Bitcoin and Etherium as “clear danger”, the governor of India’s top Reserve Bank (RBI) on Thursday said anything that derives value based on make believe, without any underlying, is just speculation under a sophisticated name.

RBI Governor Shaktikanta Das said this in the latest Financial Stability Report of India, even as the country’s government is in the process of finalising a consultation paper on cryptocurrencies after gathering inputs from various stakeholders and institutions.

In the foreword to the 25th issue of the Financial Stability Report (FSR), the RBI Governor also cautioned people to be mindful of cyber risks emerging due to increased use of technology in financial system.

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“We must be mindful of the emerging risks on the horizon. Cryptocurrencies are a clear danger. Anything that derives value based on make believe, without any underlying, is just speculation under a sophisticated name,” Shaktikanta Das said.

“While technology has supported the reach of the financial sector and its benefits must be fully harnessed, its potential to disrupt financial stability has to be guarded against. As the financial system gets increasingly digitalised, cyber risks are growing and need special attention,” the Governor said.

The top bank operator’s warning comes at a time when the cryptocurrency, a totally decentralised and internet-based creation, market has seen major swings amid global uncertainties.

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Earlier in February this year, the RBI had noticed misleading advertisements of unauthorised Electronic Trading Platforms (ETPs) offering forex trading facilities to Indian residents, including on social media platforms, search engines, Over The Top (OTT) platforms, gaming apps and the like.

There were reports of such ETPs engaging agents who personally contact gullible people to undertake forex trading/investment schemes and entice them with promises of disproportionate or exorbitant returns.

Further, there were reports of frauds committed by such unauthorised ETPs and portals and many residents losing money through such trading or schemes.

The RBI had first come out with a circular regarding cryptocurrencies in 2018 when it had barred entities regulated by it from dealing in such instruments. However, in early 2020, India’s apex Supreme Court struck down the circular.

While regulatory clarity is yet to emerge about the cryptocurrency space in India, the government is working to finalise a consultation paper on cryptocurrencies with inputs from various stakeholders and institutions, including the World Bank and the IMF.

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