The US Banking Crisis Shows the Risks of Crypto: RBI Governor

The US Banking Crisis Shows the Risks of Crypto: RBI Governor 

The Governor of the Reserve Bank of India (RBI) has said that the "ongoing US banking crisis" clearly demonstrates the risks cryptocurrency poses to the financial system. The RBI Governor added that the "Indian economy remains resilient" and that the "worst of inflation is behind us." 

Crypto Risks to Financial System 

While commenting on the US banking crisis at the 17th K P Hormis Commemorative Lecture on Friday, the Reserve Bank of India (RBI) Governor warned about the risks cryptocurrencies pose to the financial system. The RBI Governor Shaktikanta Das said: 

"The ongoing US banking crisis drives home the importance of robust regulators and sustainable growth, and clearly shows the risks of private cryptocurrencies to the financial system." 

Das was referring to the recent collapses of several banks in the US. The Signature Bank was seized by the New York State Department of Financial Services last Sunday, while Silicon Valley Bank was shut down by regulators last Friday. They became the second and third largest banks in the US to fail. In addition, Silvergate Bank announced voluntary liquidation earlier this month. 

People largely believe that regulatory actions against crypto-friendly banks are related to cryptocurrency, including Senator Elizabeth Warren (D-MA), who attributed the failure of Signature Bank to its acceptance of crypto clients without sufficient safeguards. However, regulators have insisted that their actions have nothing to do with crypto. 

The RBI governor insisted that the US banking crisis shows the "need for prudent asset liability management." Das added:

"The Indian economy remains resilient. The worst of inflation is behind us." 

Central Banking Awards 2023 for RBI Governor

Das, who was named Governor of the Year by the Central Banking Awards 2023 on Wednesday, has repeatedly warned about crypto risks. According to the Indian central bank chief, cryptocurrencies not only pose a significant threat to India’s macroeconomic and financial stability but also seriously undermine the RBI’s capacity to determine monetary policy and regulate the country’s monetary system. 

What is your take on the US banking crisis statements by RBI Governor Shaktikanta Das? Please post your comments.