India’s central bank has been a vocal critic of cryptocurrencies over the years; it previously stated that CBDCs could thwart the adoption of digital assets.
In its latest financial stability report published on Thursday, the Reserve Bank of India, or RBI, reiterated its skepticism of digital assets, writing:
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.
The report alleged that decentralized cryptocurrencies “are designed to bypass the financial system and all its controls,” including Anti-Money Laundering, Combatting Financial Terrorism, and Know Your Customer mechanisms.
In the report, it was mentioned that private currencies lost their properties over time and badly affected the money supply.
However, despite all the harsh words, cryptocurrencies, perhaps ironically, rank at the nadir of the RBI’s risk agenda. Based on a systemic risk survey, factors such as global growth headwinds, rising commodity prices and geopolitical tensions were regarded 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 scale, being tied to sovereign rating downgrades and just slightly above political uncertainty and the threat of terrorism.
RBI said this is due to the problem of integration with the local market as well as being small digital assets.
Cryptocurrencies currently account for anywhere between 0.4% to 1% of the world’s estimated $469 trillion in total financial assets.