Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday said that cryptocurrencies were a threat to the financial stability of the country and had no underlying value.
“Investors in cryptocurrencies, when they are investing, should keep in mind that whatever they are investing is at their own risk. They should also keep in mind that cryptocurrencies have no underlying [asset], not even a tulip.”
Tulip reference is to the 17th-century tulip bulb market bubble. He was answering a question on cryptocurrencies at a press conference soon after announcement of the monetary policy.
“Private cryptocurrency or whatever the name you call is a big threat to our macroeconomic and financial stability,” he said. Mr. Das said that the central bank was carefully working to come out with its own Central Bank Digital Currency (CBDC). “We are making progress on CBDC after carefully, cautiously examining it because there are risks,” he said.
“The biggest risk is cybersecurity and possibility of counterfeiting. We should absolutely prevent that,” he said. The RBI, as stated in the Union Budget proposal, will come out with the CBDC by the end of the next financial year.
RBI said that the digital currency would be like the paper currency but in virtual form. It can be used digitally to make payments. The CBDC is backed by the RBI, while any other cryptocurrency is privately created.