11 Feb , 2022 By : monika singh
Reserve Bank of India (RBI) governor Shaktikanta Das on Thursday sought to warn investors of the risks of investing in cryptocurrencies. Those investing are doing so at their own risk and must remember that crypto assets have no underlying, “not even a tulip”, he said.
The governor may have been alluding to a 17th-century phenomenon called ‘tulip mania’, where contract prices for tulip bulbs soared to extremely high levels before crashing in a matter of years. It is widely considered the first asset bubble in recorded history.
While Das has said on several occasions that the central bank has reservations about cryptocurrencies that it has conveyed to the government, this is the first time he has chosen to directly warn investors. In the Union Budget for FY23, announced last week, the government said it would start taxing income from transfer of crypto assets at 30%. Many saw it as a sign that the government saw crypto investing as a legitimate activity.
On Thursday, Das said private cryptocurrencies are a threat to India’s macroeconomic and financial stability. “Private cryptocurrencies which have currency-like character will undermine RBI’s ability to deal with issues of financial stability. It is my duty to say that cryptocurrency investors should be aware that they are investing at their own risk. They should also keep in mind that cryptocurrencies have no underlying, not even a tulip,” he said.
At the same time, work on the RBI’s digital rupee project is on and the central bank wants to take its time to launch it, Das said. “We do not want to give any timeline for CBDC (central bank digital currency),” he said, adding that the RBI is examining the matter with caution and evaluating associated risks. “The biggest of them is cybersecurity and the possibility of counterfeiting, which need to be prevented. It is a new product and globally central banks working on CBDCs are proceeding with utmost caution, and we too are proceeding with due care and caution,” Das said.
On earlier occasions, RBI officials have posited the digital rupee as a stable and regulated alternative to private cryptocurrencies.
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