In the preface to the RBI’s latest Financial Stability Report released on Thursday, Das wrote that cryptocurrencies are a speculation under a sophisticated name.
“While technology supports the accessibility of the financial sector and its benefits should be fully harnessed, its potential to disrupt financial stability must be guarded against,” he wrote.
The RBI governor also cautioned against increasing cyber risks resulting from increasing digitization of financial systems.
This is not the first time that Das has expressed concern over the risks associated with crypto investments. Das has often cautioned against investing in cryptocurrencies.
Announcing the bi-monthly monetary policy results in February, Das cautioned investors by citing the ‘tulip frenzy’ of the 17th century – widely regarded as the first financial bubble. He had said that investors should remember that cryptocurrencies have no basis, not even a tulip.
Furthermore, the report noted that risks from crypto assets to financial stability currently appear to be limited as the overall size is small (0.4 percent of global financial assets) and their interrelationship with the traditional financial system is restricted.
However, it cautioned that the associated risks are likely to increase as these assets and the ecosystem that supports their growth continue to evolve.
In particular, the report highlighted the need to closely monitor stablecoins.
“Risks from stablecoins that claim to maintain a stable value against existing fiat currencies require particularly close monitoring – they are similar to money market funds and face similar redemption risks and Investors move because they are backed by assets that can lose value or become liquid in times of market stress,” it added.
Citing one example, the report states that historically private currencies have created volatility over time and, in the current context, are a result of ‘dollarisation’, as they form a parallel currency system, which can reduce the money supply, can weaken sovereign control over interest rates and Macroeconomic stability.
Furthermore, the Financial Stability Report states that cryptos can impair financial stability as they are not debt or instruments of financial assets and have no intrinsic value.
The central bank has always maintained a strong stance against private digital currencies. It prohibited the banking system from assisting such trades, which was struck down by the Supreme Court in 2020.
Earlier this year in February, Das said it was his “duty” to caution investors, and asked them to keep in mind that they were investing at their own risk.