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Cryptocurrencies Are A Clear Danger, Says RBI Governor Shaktikanta Das

He further cautioned on cryptocurrencies’ potential to disrupt financial stability

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The RBI has come out with its 25th Financial Stability Report (FSR). In its foreword, RBI Governor Shaktikanta Das called cryptocurrencies a clear danger.

Central bank governor Shaktikanta Das has termed cryptocurrencies to be a clear danger in the 25th Financial Stability Report (FSR). He further cautioned on cryptocurrencies’ potential to disrupt financial stability.

“Anything that derives value based on make believe, without any underlying, is just speculation under a sophisticated name”, he wrote in the report. He said as financial system continues to be digitalised, the ecosystem needs attention.

The report said the risks from cypto assets to financial stability are limited right now as the overall size is small. But the risks are likely to grow as these assets and the ecosystem grow.

“The risks from stablecoins that claim to maintain a stable value against existing fiat currencies require close monitoring, in particular - they are akin to money market funds and face similar redemption risks and investor runs because they are backed by assets that can lose value or become illiquid in times of market stress”, highlighted the report.

The FSR also said that cryptocurrencies can erode capital account regulation for developing nations.

“Cryptocurrencies, typically created on decentralised systems, are designed to bypass the financial system and all its controls, including Anti-Money Laundering (AML)/Combatting the Financial Terrorism (CFT) and Know Your Customer (KYC) regulations”, mentioned the report.

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