Megha Agrawal
Reserve Bank of India (RBI) Governor Shaktikanta Das reiterated the central bank’s unwavering stance against cryptocurrencies, even as the US Securities and Exchange Commission approved changes allowing the creation of a bitcoin exchange-traded fund (ETF) in the United States. Das emphasized that the RBI would not follow the path of other countries when it comes to cryptocurrency regulations, asserting that “what is good for another market need not be good for us.”
“The RBI’s position on cryptocurrency remains unchanged. Traveling down that path will create huge risks. I don’t think the world or emerging markets (EMs) can take a crypto mania like the Tulip mania,” Das stated during a media event.
For several years, Das and other RBI deputy governors have expressed concerns about the disruptive potential of cryptocurrencies in destabilizing the banking system and have consistently advocated for their ban.
In response to a question about the Central Bank Digital Currency (CBDC), which is the RBI’s response to private digital currencies, Das mentioned that the RBI is actively working on enhancing the programmability of the digital rupee. This enhancement aims to facilitate specific payments such as government subsidies and cash payouts.
“We are expanding wholesale CBDC and exploring the potential for programmable features in retail CBDC to enable senders to define specific end uses,” Das explained.
Das also commended the role of private companies in making India a global leader in the Unified Payments Interface (UPI) payment system. He dismissed criticism that the success of UPI has created a monopoly for its creator, the National Payments Corporation of India (NPCI). UPI has already expanded its reach to other countries, including Singapore and the UAE, with monthly transaction volumes surpassing 100 billion.
“The global jubilation following the approval of a Bitcoin ETF stands in stark contrast to India’s murky crypto landscape. This development is bound to exert mounting pressure on Indian regulators, further accentuating the divide between crypto enthusiasts and regulators in a nation where cryptocurrency policies have often been criticized as backward-looking,” said Gaurav Mehta, Founder of Catax – A Blockchain Auditing and Accounting Firm.
In addition to his comments on cryptocurrencies and digital payments, Governor Das expressed concern about banks relying excessively on algorithms and artificial intelligence for assessing customer loan applications. He cautioned against model-based algorithm lending, warning that it could “lead to a potential crisis.” Das urged banks and non-bank financial companies to thoroughly assess the robustness of the lending models they employ.