Reserve Bank of India Governor (RBI) Warns Crypto Market May Collapse

Reserve Bank of India (RBI) Governor Warns Crypto Market May Collapse

The RBI Governor, Shaktikanta Das, has warned that the crypto market may crash and small investors will lose money. He added that the central bank believes that its warnings have dissuaded many people from investing in cryptocurrencies.

Small Investors Will Lose Money

In an interview with ET Now, the Governor of the Indian Central Bank, the Reserve Bank of India (RBI), Shaktikanta Das, warned about investing in cryptocurrency.

Noting that the RBI has cautioned investors on several occasions about the risks of investing in crypto, Das said: "I’m happy that we sounded those warning signals and I would like to believe that a large number of people would have taken note of the warning signals and the concerns expressed by the Reserve Bank." He added,

"I would like to believe... that many people did not invest in crypto or sort of pulled out of crypto thanks to the cautions and concerns that emanated out of the Reserve Bank."

"Crypto, you know, we have said it earlier, can create a lot of financial instability in terms of the ability of the Central Bank to determine monetary policy," the RBI Governor continued. "It will also have an adverse impact on our exchange rate, on capital flows, and on banking sector stability."

Das expressed concern that cryptocurrency has the "potential to be used as a tool for money laundering and illicit money transfer." He also reiterated his earlier statement: "In fact, I said at one point that it doesn’t have any underpinning, not even a tulip."

The Reserve Bank of India, Governor opined:

"Something which doesn’t have an underlying, the prices will not remain high all the time, so therefore it may crash, and it has crashed, ultimately." It is the small investors who lose money. Therefore, it is a big risk for small investors."

Das said in July that cryptocurrencies are a clear danger. In May, he warned about crypto amid a market sell-off. "We have been cautioning against crypto and look at what has happened to the crypto market now," the Governor said after the collapse of cryptocurrency terra (LUNA) and stablecoin terrausd (UST).

However, Indian Finance Minister Nirmala Sitharaman said that both banning and regulation can only be effective with "significant" international collaboration.

India still doesn’t have a specific regulatory framework for cryptocurrency. The Indian government has been working on a crypto bill for several years, but it has yet to be taken up in Parliament. Recently, the finance minister asked crypto investors to be cautious as authorities investigate several crypto exchanges in money laundering cases.