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RBI Governor reiterates ban on cryptocurrencies despite SEC approval for Bitcoin ETF in the US
Crypto News: In a media event held on Thursday, Reserve Bank of India (RBI) Governor Shaktikanta Das reiterated the central bank's steadfast stance against cryptocurrencies, underscoring the perceived risks that these digital assets pose to the stability of the banking system. This pronouncement comes at a time when regulatory approaches to cryptocurrencies vary globally, with the United States recently approving changes facilitating the creation of a bitcoin exchange-traded fund (ETF).
Governor Das made it clear that the RBI would not emulate the regulatory path taken by other countries, emphasizing the need for a tailored approach that considers India's unique economic and financial landscape. He expressed apprehensions about potential risks associated with cryptocurrencies, drawing parallels with historical episodes such as the Tulip mania. Das's cautious stance aligns with the RBI's historical reservations about digital currencies and their impact on the traditional banking system. Contrary to the recent move by the US Securities and Exchange Commission (SEC) to approve a bitcoin ETF, Governor Das emphasized that what might work for one market may not necessarily be suitable for another.
Governor Das also shed light on the RBI's ongoing efforts to enhance the programmability of the digital rupee, the Central Bank Digital Currency (CBDC). The objective is to enable specific payments, such as government subsidies and cash payouts, through this digital currency. This move aligns with global trends where central banks are exploring the potential benefits of CBDCs, with a focus on improving efficiency and reducing costs in financial transactions.
During the media event, Governor Das commended the success of the Unified Payments Interface (UPI) payment system in India, calling it the best in the world. Despite this praise, he expressed openness to competition and innovation in the payments sector. Notably, he mentioned that no proposals for a rival to the National Payments Corporation of India (NPCI) had presented groundbreaking solutions. This signals the RBI's willingness to embrace competition while ensuring that any new entrants meet high standards of innovation and reliability.
Additionally, Governor Das issued a cautionary note regarding the excessive reliance on algorithms and artificial intelligence (AI) by banks for assessing customer loans. He raised concerns about the potential risks associated with model-based algorithm lending, highlighting the possibility of a crisis stemming from the lack of robustness in these models. This warning underscores the importance of maintaining a balance between technological advancements and the stability of financial systems. Financial institutions were urged to thoroughly appraise the robustness of the models they use for lending, emphasizing the need for prudence and risk management.
In conclusion, Governor Shaktikanta Das's recent statements reflect the RBI's unwavering stance against cryptocurrencies due to perceived risks to the banking system. The central bank's commitment to a tailored regulatory approach, its ongoing efforts to enhance the digital rupee's programmability, and cautious warnings about the use of algorithms in banking collectively paint a picture of a regulatory authority keen on balancing innovation with stability in India's financial sector. As the global landscape evolves, the RBI remains steadfast in its commitment to safeguarding the Indian financial system from potential disruptions associated with emerging technologies.