RBI governor Shaktikanta Das issues warning against cryptocurrencies

According to Reserve Bank of India (RBI) Governor Shaktikanta Das, India’s ostensible demand and publicised interest in crypto currencies are likely overblown, and may be a marketing strategy to attract more people to a fresh asset class disapproved by the regulator. Das also underlined his concerns about cryptocurrencies, adding that the government was actively considering the regulator’s suggestions.

“In terms of the quantity invested, it’s clearly expanding, and anecdotally we hear so many things,” Das stated. “But I’m not convinced by the figures being cited. Because, based on the information we have, I can declare with considerable certainty that the number of players in the crypto market appears overblown.”

The vast majority of investors, or over 70% or more, have invested between Rs. 1,000 and Rs. 3,000. Das speculated that there may be a push to enrol as many people as possible.

The RBI governor also expressed concern about the financial instability that such investments could generate, and noted that the government was actively examining its proposals.

“People are engaging in certain activities; as a central bank, we have major worries about macroeconomic and financial stability,” he said. “We have provided the authorities with extensive recommendations for dealing with the problem. As far as I know, the government is actively considering the issue and will make a decision.”

Indian investments in cryptocurrencies have surpassed the $10 billion level in recent months, according to a report published on November 1 by ET. According to CREBACO, a research agency, around 105 million persons, or 7.9 percent of Indians, have invested in cryptocurrencies through Indian exchanges.

Meanwhile, Das applauded the government’s decision to reduce excise duty on gasoline and diesel, noting that the government has addressed various supply-side limitations that were contributing to inflation. Inflation is expected to be 5.3 percent in FY22, according to the RBI.

Governor Das also indicated confidence in handling currency volatility and stated that a repeat of the 2013 taper tantrum was improbable in the rare case of massive value capital outflows. For the week ending October 29, India’s foreign reserves reached an all-time high of $642.019 billion.

The RBI governor also instructed banks to focus on risk pricing on retail and housing loans, and he anticipates that demand for bank credit will increase next year.

“There are hints of investment picking up next year, and demand for bank credit will pick up from there,” he predicted. “Investment credit, or demand from the industrial and corporate sectors, will pick up next year, based on feedback I’ve received.”