Crypto Poses Risks According to IMF and FSB
Governor Shaktikanta Das continues to express his concerns about cryptocurrencies while ignoring the instability of fiat currencies. He consistently warns about the perceived dangers of crypto whenever he has the opportunity.
During an interview at the Business Standard BFSI Insight Summit 2023 in Mumbai, Governor Das stated that everyone agrees on the serious risks crypto poses to the traditional financial system. He referred to a synthesis paper by the International Monetary Fund (IMF) and Financial Stability Board (FSB) that suggests countries impose additional restrictions on cryptocurrencies based on their specific requirements, especially for emerging markets and developing economies.
The fact that these financial authorities support extra restrictions on crypto indicates their preference for maintaining the fiat currency system.
No Clear Definition of Crypto
Governor Das expressed doubts about how cryptocurrencies are defined. He questioned how they can be regulated when there is no clear understanding of what they are. He asked whether crypto is a product, a financial product, or an asset, and what defines it as intangible. However, this critique reveals his limited knowledge of cryptocurrencies.
Ironically, fiat currencies also lack tangibility and have underlying value determined by the State. The rapid debasement of fiat currencies undermines their stability.
What Sets Crypto Apart from CBDCs?
Governor Das dismissed the purpose of cryptocurrencies by asking what they can do in digital transactions that Central Bank Digital Currencies (CBDCs) cannot. However, cryptocurrencies like Bitcoin offer independence from government control and the debasement of currency through unlimited issuance.
On the other hand, CBDCs would grant central banks extensive surveillance powers and enable them to enforce rules on citizens under threat of penalties.
Private Currency vs. Government-Enforced Currency
Governor Das acknowledges that cryptocurrencies are a form of private currency, which aligns with the intentions of the American forefathers who established their Constitution. However, they could not have foreseen the creation of private central banks like the Federal Reserve, which has printed money for the benefit of banks at the expense of the American people.
As the representative of the Indian central bank, Governor Das cannot support any competitor to the existing system, regardless of its innovation or benefits for citizens.
Hot Take: Governor Das Continues to Express Concerns About Crypto
Governor Shaktikanta Das remains steadfast in his anti-crypto stance, warning about the risks associated with cryptocurrencies. While he raises valid questions about regulation and definition, his limited understanding overlooks the flaws in traditional fiat currencies. The preference for imposing restrictions on crypto from financial authorities aligned with the fiat currency system is telling. However, cryptocurrencies offer unique advantages such as independence from government control and protection against currency debasement. It is crucial to consider both perspectives when evaluating the future of digital currencies.
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