India’s Reserve Bank has condemned cryptocurrency saying the risks they create demand attention before they undermine established institutions. The national bank has warned of the rise of parallel currency systems that are particularly dangerous for developing economies.
“Cryptocurrencies are a clear danger,” says the national bank in its latest financial stability report. “Anything that derives value based on make-believe, without any underlying value, is just speculation under a sophisticated name,” added the governor Shaktikanta Das.
In his assessment, the governor claims cryptocurrencies are akin to money market funds that face similar redemption risks and investor runs because they are backed by assets that can lose value or become illiquid in times of market stress.
“They create parallel currency system(s), which can undermine sovereign control over the money supply, interest rates, and macroeconomic stability,” the report argues, adding “For developing economies, cryptocurrencies can erode capital account regulation, which can weaken exchange rate management.”
This is not the first major Eastern power to reject crypto. Recently, China’s state-sponsored blockchain initiative labeled cryptocurrency a Ponzi scheme, virtual currency as the largest Ponzi scheme in human history, and Singaporean authorities warned private cryptocurrency for causing market turmoil.
