Cryptocurrencies Poses Serious Challenge To Country's Financial Stability: RBI Note

The central bank also said that CBCDs are the next step in the evolutionary progression of sovereign currency

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The Reserve Bank of India (RBI), in its concept note on central bank digital currency released on Friday, has said that private cryptocurrencies undermine India's financial and macroeconomic stability because of their negative consequences for the financial sector.

Shaktikanta Das Twitter handle

"Further, a wider proliferation of cryptocurrencies has the potential to diminish monetary authorities' power to determine and regulate monetary policy and the monetary system of the country, which could pose a serious challenge to the stability of the country's financial system," said RBI.

The central bank had always expressed its disagreement to the private cryptocurrencies and RBI governor Shaktikanta Das, on the 25th issue of RBI's financial stability report, had also stated that cyptocurrencies are a clear danger and anything that derives value based on make-believe, without any underlying value is just speculation under a sophisticated name.

"The inherent design of cryptocurrencies is more geared to bypass the established and regulated intermediation and control arrangements that play a crucial role of ensuring integrity and stability of the monetary and financial ecosystems," said the concept note.

It is also said that CBCDs are the next step in the evolutionary progression of sovereign currency. Central Bank Digital Currency (CBDC) is a digital form of currency notes issued by a central bank. The purpose behind the issue of this concept note is to create awareness about CBDCs in general and the planned features of the digital rupee, in particular. The note also seeks to explain Reserve Bank's approach towards introduction to the digital Rupee.

The Reserve Bank will soon commence limited pilot launches of e-Rupee for specific use cases. It is expected that this note would facilitate a deeper appreciation and understanding of digital Rupee and help members of public prepare for its use.