Cryptocurrencies will be responsible for next financial crisis unless…. -Reserve Bank Chief

*Shaktikanta Das, Governor of the Reserve Bank of India, states Cryptocurrencies will be responsible for the next financial crisis, if allowed to proliferate freely, as it  advocates a total ban of virtual currencies

*Cryptocurrency market shrinks by $1.4 trillion

Isola Moses | ConsumerConnect

As most Central Banks worldwide intensify efforts  at introducing own Central Bank Digital Currencies (CBDCs), Shaktikanta Das, Governor of the Reserve Bank of India (RBI), has said Cryptocurrencies will be responsible for the next financial crisis, if allowed to proliferate freely.

ConsumerConnect learnt the country’s financial regulator recently, launched pilots for the retail and wholesale versions of India’s CBDC the digital Rupee, which it hopes will serve as a bulwark against cryptocurrencies.

The next financial crisis will come from private Cryptocurrencies, if they are allowed to grow unchecked, RBI Governor said.

Speaking at the BFSI Insight Summit 2022 hosted by Business Standard, Das said he still holds the view that Cryptocurrencies should be banned as they have no underlying value and pose risks for macroeconomic and financial stability.

Evolution of Digital Rupee

The RBI has long held its view that private cryptocurrencies are a threat to stability, and has been against legitimising its use in the Indian economy, ETTech report said.

In a move to combat them in the country, the Central Bank recently launched pilots of its own CBDC, the digital Rupee.

According to report, the pilot for the retail version of the digital Rupee began December 1, 2022, covering select locations in a closed user group comprising participating consumers and merchants.

It was first rolled out first in Mumbai, New Delhi, Bengaluru and Bhubaneswar and will soon be extended to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla, report stated.

The pilot for the wholesale version had been activated November 1, in partnership with nine banks.

In this pilot, the digital Rupee is being used to settle secondary market transactions in government securities.

Bitcoin loses 60 percent of  value

Meanwhile, Bitcoin has lost 60 percent of its value and the wider cryptocurrency market has shrunk by $1.4 trillion this year, thanks to rising interest rates, vanishing risk appetite and corporate collapses including that of Sam Bankman-Fried’s FTX, according to report.

Crypto funds have seen net inflows of $498 million in 2022, versus $9.1 billion in 2021, data from digital asset manager CoinShares indicated.

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