The RBI warns against the dominance of cryptocurrencies amid a surge in cyberattacks

Reserve Bank of India Governor Shaktikanta Das has warned that cryptocurrencies should not be allowed to dominate due to their significant risks to financial stability, monetary stability and the banking sector

Das highlighted the risks associated with cryptocurrencies, noting that if central banks lose control of the money supply, managing liquidity and controlling inflation in times of crisis will become a challenge

He further shared that the Reserve Bank of India was among the first to express serious concerns, viewing cryptocurrencies as a major risk to financial stability

At the moment when cyberattacks on Indian websites increased by 261% year-on-year in the first quarter of 2024, Reserve Bank of India Governor Shaktikanta Das has warned that cryptocurrencies should not be allowed to dominate due to their significant risks to financial stability, monetary stability and the banking sector.

As per the PTI report, Das highlighted the risks associated with cryptocurrencies, noting that if central banks lose control over the money supply, managing liquidity and controlling inflation in times of crisis will become a challenge.

During his speech at the Peterson Institute for International Economics, Das said: “I actually believe that this is something that should not be allowed to dominate the financial system because it poses a huge risk to financial stability, it poses a huge risk to stability. monetary policy, it also poses a risk to the banking system. This could create a situation where the central bank could lose control over the money supply in the economy.”

Given the cross-border nature of cryptocurrency transactions, he emphasized the need for international cooperation.

“There must be international understanding on this issue, with full awareness of the enormous risks associated with cryptocurrencies. This is not something I think should be encouraged. This view is not very popular, but I believe that as guardians of financial stability, it is a major concern for central banks around the world. Governments are also increasingly aware of the possible risks associated with cryptocurrencies,” Das said.

He further shared that the Reserve Bank of India was among the first to express serious concerns regarding cryptocurrencies as a major risk to financial stability, and stated that it had strong reasons for such a cautious stance.

According to the report, Das emphasized the need to understand the origins of cryptocurrencies that were intended to bypass traditional systems. He noted that cryptocurrencies have all the characteristics of money.

He further added that issuing currencies is the government’s responsibility, which raises a broader question about the acceptability of cryptocurrencies operating alongside fiat currencies.

The development came at a time when WazirX faced a problem serious data breach this led to the theft of digital assets worth approximately $230 million. This attack compromised almost 45% of WaxirX’s total assets, resulting in a $546 million debit to the cryptocurrency exchange. The company also filed an affidavit in the High Court of Singapore revealing details of over 240,000 wallet addresses.

Months later, government agencies began investigating the heist, seeking information about the illegal transfer of crypto tokens from the company’s wallets.