On Wednesday, the governor of India’s central bank stated that they are not at war with crypto but that cryptocurrencies lack fundamentals and should be banned.
Shaktikanta Das, Governor of RBI, told a packed room of banking executives and lawmakers that crypto poses a significant risk to the stability and macroeconomic health of the country.
“After the development of the last one year, including the latest episode surrounding FTX, I don’t think we need to say anything more. “Time has proven that crypto is worth what it’s worth today.”
“Change in value in any so-called product is the function of the market. But unlike any other asset or product, our main concern with crypto is that it doesn’t have any underlying whatsoever.”
“I think crypto or private cryptocurrency is a fashionable way of describing what is otherwise a 100% speculative activity,” said Das.
“They don’t believe in the central bank, they don’t believe in a regulated financial world. I’m yet to hear a good argument about what public purpose it serves,” he said.
“It should be prohibited because if it is allowed to grow … say it’s regulated and allowed to grow … please mark my words that the next financial crisis will come from private cryptocurrencies,” he said.
India is one of the countries that have taken a strict approach to cryptocurrency. It began taxing virtual currencies earlier this year. There is a 30% tax on gains and a 1% deduction for each transaction.
Along with the market downturn, the nation’s move has greatly reduced the transactions on local exchanges CoinSwitch Kuber and CoinDCX.
Changpeng Zhao (CZ), founder and chief executive at Binance, the largest cryptocurrency exchange in the world, said that the company doesn’t consider India a “very crypto-friendly environment” but is trying to communicate its concerns to the local authority regarding the taxation.
“Binance goes to countries where regulations are pro-crypto and pro-business. We don’t go to countries where we won’t have a sustainable business — or any business, regardless of whether or not we go,” he said.
Coinbase, which supports CoinDCX and CoinSwitch Kuber in India, launched its cryptocurrency platform earlier this month but was quickly stopped by regulators.
In May, Brian Armstrong, Coinbase’s co-founder and chief executive, stated that Coinbase had removed support for local payments infra UPI “because of some informal pressure by the [central bank] Reserve Bank of India.”
“Crypto closed 2021 with the narrative that finance as we know it was slow, inefficient and clumsy. Defi and DAOs were the path forward. Crypto prices, in their own jargon, were mooning and investors were HODLing. Since May 2022, cryptos have lost some of the shine — two-thirds of the value. Failure of some entities have caused the ecosystem to unravel,” T. Rabi Sankar, Deputy Governor of RBI, who once likened crypto to tulip and Ponzi scheme, said Wednesday.
“The technology that was heralded as the end of government, and regulators and intermediaries — the underlying philosophy of crypto — is now frantically seeking to be regulated,” he said.