RBI warns against cryptocurrency dominance amid rise in cyberattacks

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

Das highlighted the risks of cryptocurrencies and noted that if central banks lose control over the money supply, managing liquidity and controlling inflation in times of crisis would be a challenge.

Furthermore, he shared that the Reserve Bank of India has been one of the first to raise serious concerns, considering cryptocurrencies as major risks to financial stability.

at a time when cyber attacks on Indian websites have risen 261% year-on-year in the first quarter of 2024, Reserve Bank of India Governor Shaktikanta Das warned that cryptocurrencies should not be allowed to dominate due to their considerable risks to financial stability, monetary stability and the banking sector.

According to a PTI report, Das highlighted the risks of cryptocurrencies and noted that if central banks lose control over the money supply, managing liquidity and controlling inflation in times of crisis would be a challenge.

During his appearance at the Peterson Institute for International Economics, a think tank, Das said: “I am actually of the opinion that this should not be allowed to dominate the financial system because it carries enormous risks to financial stability, it has enormous risks risks to monetary stability and also poses risks to the banking system. “It can create a situation where the central bank could lose control of the money supply in the economy.”

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

“There has to be an international understanding on this issue, being fully aware 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 custodians of financial stability, it is a major concern for central banks around the world. Governments are also increasingly aware of the potential downside risks of cryptocurrencies,” Das said.

Furthermore, he shared that the Reserve Bank of India has been one of the first to raise serious concerns, considering cryptocurrencies as major risks to financial stability, and said that they have strong reasons for this cautious stance.

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

He further added that issuing currency is the responsibility of the government, raising a broader question about the acceptability of cryptocurrencies working alongside fiat currencies.

The development comes at a time when WazirX was facing a major data breach that resulted in the theft of approximately $230 million in digital assets. This attack compromised nearly 45% of WaxirX’s total assets, creating liabilities worth $546 million on the crypto exchange. The company also filed an affidavit with the Singapore High Court in which it published data of more than 240,000 wallet addresses.

Months later, government agencies launched an investigation into the heist, seeking information about the illegal transfer of crypto tokens from their wallets.