<p>Ahead of the government's consultation paper on cryptocurrencies, RBI Governor Shaktikanta Das Friday said cryptocurrencies are a clear danger.</p>.<p>The government is in the process of finalising a consultation paper on cryptocurrencies after gathering inputs from various stakeholders and institutions.</p>.<p>Reserve Bank of India (RBI) has been flagging concerns about cryptocurrencies, which are seen as a highly speculative asset.</p>.<p>"We must be mindful of the emerging risks on the horizon. Cryptocurrencies are a clear danger. Anything that derives value based on make believe, without any underlying, is just speculation under a sophisticated name," Das said.</p>.<p>The financial stability report released by the central bank said the risk from such currencies is likely to grow with the growth in their size. Currently the size of these assets is limited.</p>.<p>"Cryptocurrencies, typically created on decentralised systems, are designed to bypass the financial system and all its controls, including money laundering (AML)/combatting the financial terrorism (CFT) and know your customer (KYC) regulations," it said.</p>.<p>Cryptocurrencies are not currencies as they do not have an issuer, they are not an instrument of debt or a financial asset and they do not have any intrinsic value. At the same time, cryptocurrencies pose risks.</p>.<p>"Historically, private currencies have resulted in instability over time and in the current context, result in ‘dollarisation’, as they create parallel currency system(s), which can undermine sovereign control over money supply, interest rates and macroeconomic stability. For developing economies, cryptocurrencies can erode capital account regulation, which can weaken exchange rate management," the RBI said.</p>.<p>For developing economies, cryptocurrencies can erode capital account regulation.</p>.<p>At the same time, cryptocurrencies pose risks, according to the report.</p>.<p>The comments came at a time when the Centre is readying itself to issue consultation paper on cryptocurrencies. The consultation paper will have inputs from various stakeholders, including the World Bank and International Monetary Fund (IMF) on crpto currency regulation and its ecosystem.</p>.<p><strong>Also Read: <a href="https://www.deccanherald.com/national/tech-usage-to-revenue-leak-plugs-a-look-hits-misses-of-gst-in-last-5-years-1122654.html" target="_blank">Tech usage to revenue leak plugs: A look hits & misses of GST in last 5 years</a></strong></p>.<p>In recent weeks, cryptocurrencies, which are not back by any underlying value, have witnessed massive volatility amid global uncertainties.</p>.<p>RBI first come out with a circular regarding cryptocurrencies in 2018 and had barred entities regulated by it from dealing in such instruments. However, in early 2020, Supreme Court struck down the circular.</p>.<p><strong>Also Read: <a href="https://www.deccanherald.com/business/business-news/crypto-exchanges-hunker-down-as-everything-goes-wrong-in-india-1121516.html" target="_blank">Crypto exchanges hunker down as everything goes wrong in India</a></strong></p>.<p>Regarding the economy, he said it is skewed towards global spillovers and geopolitical tensions.</p>.<p>The Indian financial system exhibits underlying robustness and resilience to withstand these shocks. "Our endeavour is to face all challenges, external and internal, with strength and innovative solutions for the Indian financial system," he added.</p>.<p>A noteworthy feature of the current situation is the overall resilience of Indian financial institutions, which should stand the economy in good stead as it strengthens its prospects. This reflects a combination of good governance and risk management practices, he said.</p>.<p>According to him, the stress test results presented in the FSR demonstrate that banks are well positioned to withstand even severe stress scenarios without falling below the minimum capital requirement.</p>.<p>He also said that the corporate sector is deleveraged with stronger bottom lines and the external sector is well-buffered to withstand the ongoing terms of trade shocks and portfolio outflows.</p>.<p>"In a dynamic environment with considerable uncertainty, we have been proactive and nimble footed in our policy responses. We have been calibrating our actions to the need of the hour and striving to preserve macroeconomic and financial stability to ensure sustainable and inclusive growth," he said.</p>.<p><em>With PTI inputs.</em></p>
<p>Ahead of the government's consultation paper on cryptocurrencies, RBI Governor Shaktikanta Das Friday said cryptocurrencies are a clear danger.</p>.<p>The government is in the process of finalising a consultation paper on cryptocurrencies after gathering inputs from various stakeholders and institutions.</p>.<p>Reserve Bank of India (RBI) has been flagging concerns about cryptocurrencies, which are seen as a highly speculative asset.</p>.<p>"We must be mindful of the emerging risks on the horizon. Cryptocurrencies are a clear danger. Anything that derives value based on make believe, without any underlying, is just speculation under a sophisticated name," Das said.</p>.<p>The financial stability report released by the central bank said the risk from such currencies is likely to grow with the growth in their size. Currently the size of these assets is limited.</p>.<p>"Cryptocurrencies, typically created on decentralised systems, are designed to bypass the financial system and all its controls, including money laundering (AML)/combatting the financial terrorism (CFT) and know your customer (KYC) regulations," it said.</p>.<p>Cryptocurrencies are not currencies as they do not have an issuer, they are not an instrument of debt or a financial asset and they do not have any intrinsic value. At the same time, cryptocurrencies pose risks.</p>.<p>"Historically, private currencies have resulted in instability over time and in the current context, result in ‘dollarisation’, as they create parallel currency system(s), which can undermine sovereign control over money supply, interest rates and macroeconomic stability. For developing economies, cryptocurrencies can erode capital account regulation, which can weaken exchange rate management," the RBI said.</p>.<p>For developing economies, cryptocurrencies can erode capital account regulation.</p>.<p>At the same time, cryptocurrencies pose risks, according to the report.</p>.<p>The comments came at a time when the Centre is readying itself to issue consultation paper on cryptocurrencies. The consultation paper will have inputs from various stakeholders, including the World Bank and International Monetary Fund (IMF) on crpto currency regulation and its ecosystem.</p>.<p><strong>Also Read: <a href="https://www.deccanherald.com/national/tech-usage-to-revenue-leak-plugs-a-look-hits-misses-of-gst-in-last-5-years-1122654.html" target="_blank">Tech usage to revenue leak plugs: A look hits & misses of GST in last 5 years</a></strong></p>.<p>In recent weeks, cryptocurrencies, which are not back by any underlying value, have witnessed massive volatility amid global uncertainties.</p>.<p>RBI first come out with a circular regarding cryptocurrencies in 2018 and had barred entities regulated by it from dealing in such instruments. However, in early 2020, Supreme Court struck down the circular.</p>.<p><strong>Also Read: <a href="https://www.deccanherald.com/business/business-news/crypto-exchanges-hunker-down-as-everything-goes-wrong-in-india-1121516.html" target="_blank">Crypto exchanges hunker down as everything goes wrong in India</a></strong></p>.<p>Regarding the economy, he said it is skewed towards global spillovers and geopolitical tensions.</p>.<p>The Indian financial system exhibits underlying robustness and resilience to withstand these shocks. "Our endeavour is to face all challenges, external and internal, with strength and innovative solutions for the Indian financial system," he added.</p>.<p>A noteworthy feature of the current situation is the overall resilience of Indian financial institutions, which should stand the economy in good stead as it strengthens its prospects. This reflects a combination of good governance and risk management practices, he said.</p>.<p>According to him, the stress test results presented in the FSR demonstrate that banks are well positioned to withstand even severe stress scenarios without falling below the minimum capital requirement.</p>.<p>He also said that the corporate sector is deleveraged with stronger bottom lines and the external sector is well-buffered to withstand the ongoing terms of trade shocks and portfolio outflows.</p>.<p>"In a dynamic environment with considerable uncertainty, we have been proactive and nimble footed in our policy responses. We have been calibrating our actions to the need of the hour and striving to preserve macroeconomic and financial stability to ensure sustainable and inclusive growth," he said.</p>.<p><em>With PTI inputs.</em></p>
