A day after a report estimated that India has nearly 115 million crypto investors, the country’s central bank governor says crypto is not useful for developing economies like India. India.
In a recent interview, Reserve Bank of India Governor Shaktikanta Das said, “Countries like India are placed differently from advanced economies when it comes to dollarization of the economy…”
Involuntary “dollarization” of the economy
“It’s not a good thing that our economy is happening. Therefore, for emerging market economies, since all cryptos are denominated in hard currencies as a whole [the] dollar, [they] will not work in favor of countries like India. This can work in favor of advanced economies,” Das added.
His remarks are particularly important in light of a recent KuCoin report which shows that in addition to the 115 million existing crypto investors, the majority of Indian investors intend to increase their holdings in the near future.
Also in May, the central bank warned a parliamentary panel that cryptocurrencies, especially stablecoins, could lead to an unintended “dollarization” of the economy.
speak to be[In]Cryptocurrency Vikram R Singh, Founder and CEO of blockchain development firm Antier Solutions, said that “blockchain technology and the use of virtual currencies both have unlimited potential to strengthen economies around the world.” Further adding that “implementing them in a regulated and governed manner would help countries leverage their capabilities to [the] public and private sector development,
Meanwhile, the central bank chief is also of the opinion that while supporting innovation in fintech, RBI will also assess the types of risks present in the sector and check whether they are well managed.
Das also told the newspaper: “I would like to believe that a lot of people would have taken note of the warning signals and the concerns expressed by the Reserve Bank and I would like to believe and anecdotally we are aware that many people did not invest in crypto or get out of crypto, thanks to the kind of caution and concerns that were coming from the Reserve Bank.
Industry players call for regulations to address concerns
In the past, the country’s central bank has hinted that it is unlikely to change its negative stance on virtual digital assets (VDAs) due to the financial stability concerns they raise in the economy as well as money laundering risks.
This month, India’s Directorate of Law Enforcement (ED) also blocked bank assets belonging to struggling crypto exchange Vauld and one of the directors of WazirX operator Zanmai Lab Private Ltd. , as they are under investigation for suspected money laundering.
That said, Das also questioned the intrinsic value of the entire asset class following the recent market downturn. He said: “The prices of something that has no underlying basis will not stay high all the time. Therefore, he can crash and he crashed. In the end, in a situation like this, it is the small investor who loses money, and therefore it is also a big risk for small investors.
Vineet Budki, managing partner and CEO of crypto venture capital firm Cypher Capital, said that as regulation evolves globally, current risks may decrease, saying: “Cryptocurrencies are inherently worldwide and their legal status varies from jurisdiction to jurisdiction. As we are at a very nascent stage of crypto adoption, US dollar-based stablecoins like USDC, DAI, and USDT are dominating transactions and are the entry base for most users. . We expect this to change as regulations towards crypto become favorable and economies launch their CBDCs to support the local ecosystem.
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