JAN 13, 2024
RBI Governor: No place for ‘crypto mania’ in India despite U.S. ETF approval
At the 16th Mint Annual BFSI Summit and Awards in Mumbai, Reserve Bank of India (RBI) governor Shaktikanta Das reiterated the central bank's cautious stance on cryptocurrencies, regardless of recent global developments.
During the event, which was held on Thursday, Das took to the stage. He was asked if the approval of spot bitcoin exchange-traded funds (ETFs) in the United States gives legitimacy to cryptocurrency.
Das was unwavering in his response, maintaining that the RBI remains steadfast in its approach and opposition to cryptocurrencies. He stated:
"The way we look at crypto remains unchanged, irrespective of who does what."
He emphasized that the RBI does not intend to emulate regulatory decisions made by other countries. Despite this global development, Das maintained the RBI's reservations, expressing concerns about the potential risks associated with venturing further into the cryptocurrency space.
Favoring a crypto ban
Last month, officials from the Indian central bank told the Hindustan Times that the RBI believes that the Indian government should impose an outright ban on cryptocurrencies in India. One unnamed official stated:
”The government cannot sidestep the RBI’s concerns while deciding on cryptocurrencies, as it is responsible for monetary stability in India and maintains price stability.”
Das acknowledged the potential of blockchain technology, the foundation of cryptocurrencies, highlighting its versatility for various applications. Both the central bank and the Indian government have encouraged the development of blockchain rather than crypto. Last year, an RBI-led initiative, the National Payments Corporation of India (NPCI), recruited blockchain expertise to further develop that project.
However, he made it clear that the RBI’s focus remains on strengthening governance and assurance in regulated entities, with an emphasis on early identification, close monitoring and effective management of risks.
Das cautioned against a “crypto mania,” drawing parallels to the historical tulipmania of the 17th century. He underscored the RBI’s position that embracing cryptocurrencies could pose significant risks, echoing his previous warnings about the macroeconomic and financial stability risks associated with these digital assets.
The governor emphasized the importance of instilling an appropriate risk culture within organizations, with active involvement from the board and senior management. Das stated that the RBI expects top officials and board members to play a more proactive role in risk management.
India’s crypto community responded critically to the RBI governor’s comments. Ajeet Khurana, a Web3 growth investor, responded on social media, stating:
“Dear RBI governor, I respect you a lot, and I don’t mind that you don’t like Crypto. Diverse points of view are healthy. Yet, using words like ‘tulip mania’ only gives the impression that you are out of touch with what is happening in Web3. My request, Sir, is that you update yourself.”
Vivek Sen, the founder of Bitgrow Lab, wrote:
“Dear RBI, First, don’t club Bitcoin with ‘Crypto’. Secondly, Tulips did not experience an 80% drop on four occasions, and they recovered each time.”
Despite opposition to cryptocurrencies in official circles in India, a report last year produced by Chainalysis found that India is leading the way in Asia in terms of grassroots adoption of cryptocurrencies.