The Reserve Bank of India does not consider cryptocurrencies to be a significant threat to the global financial system

The Reserve Bank of India does not consider cryptocurrencies to be a significant threat to the global financial system

In its latest financial stability report released on Thursday, The Reserve Bank of India, or RBI, reiterated its skepticism about digital assets, writing:

“We need to be aware of emerging risks on the horizon. Cryptocurrencies are a clear danger. Anything that gets a value based on fantasy, with nothing to back it up, is just speculation with a fancy name.”

The report claimed that decentralized cryptocurrencies “are designed to bypass the financial system and all of its controls,” including anti-money laundering, anti-terrorist financing, and know-your-customer requirements. In a similar tone to its previous report, the RBI asserts that private currencies often create instability over time and undermine sovereign control over the money supply.

Yet despite all the harsh criticism, cryptocurrencies, perhaps ironically, sit at the nadir of the RBI’s risk agenda. According to a systemic risk survey, factors such as global growth headwinds, rising commodity prices and geopolitical tensions were seen as high-impact events that could threaten the integrity of the global financial system.

On the other hand, digital asset risks were at the bottom of the risk-weighted ranking, linked to sovereign rating downgrades and just above political uncertainty and the threat of terrorism. Partly, the Reserve Bank of India attributes these risk limitations to the relatively low adoption of digital assets globally, as well as their lack of integration into traditional finance.

Cryptocurrencies currently account for between 0.4% and 1% of the world’s estimated $469 trillion in total financial assets. The RBI has traditionally been one of the most skeptical central banks of cryptocurrency adoption, claiming that central bank-issued digital currencies could “kill” private cryptocurrencies.

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