So far, it has been a topsy-turvy ride for cryptocurrency players in India. Not to mention, that the industry has drawn a lot of flak from regulators and policyholders. For instance, earlier, Shaktikanta Das, governor, RBI warned that private cryptocurrencies could spark the next financial crisis. “We should not be surprised if a central banker does not like Bitcoin. This is how it is supposed to be. It is bad that there is no hope or space for cryptocurrency to grow in India for the next few years,” Kumar Gaurav, founder, and CEO, Cashaa, a fiat and cryptocurrency bank, told FE Blockchain.
Furthermore, Das spoke positively about the impact of Central Bank Digital Currency (CBDC) and stated that RBI’s pilot launch of the digital rupee will revolutionise the 21st century. Interestingly, it is not the first time that the RBI has restated its doubts regarding digital assets. Earlier in June, RBI in its financial stability report revealed that cryptocurrencies are a clear danger. “Anything that derives value based on make-believe, without any underlying, is just speculation under a sophisticated name,” the report added.
Furthermore, India’s cryptocurrency stance has drawn criticism from global players. In fact, Charles Hoskinson, founder, Cardano, a proof-of-stake, blockchain platform, noted how the blockchain network has had trouble entering India’s market due to the country’s strict stance on cryptocurrencies.
“India has been strongly anti-crypto, with numerous government attempts to outright ban and criminalise the use of crypto. I’d love to enter the market, but it seems to require someone intimately familiar with it,” Hoskinson added.
Industry analysts are quick to point out that despite the RBI’s warnings, the use of digital assets has continued to grow in India all these years. ” There are a number of projects building in the Web3.0 space. The regulatory environment is constantly evolving and it is difficult to predict how Web3.0 technologies will fare in the long term in India,” Karan Ambwani, India lead, dYdX foundation, decentralised trading platform, added.
Despite all the opposition, interestingly, cryptocurrencies have ranked at the bottom of the RBI’s risk agenda. As per the systematic risk survey, rising goods prices and geopolitical tensions were regarded as major events that could potentially harm the stability of the international financial system. “One major problem is that cryptocurrency cannot be relied on as a sound nominal anchor. Even stablecoins are not always stable. This was evident during May 2022 through the implosion of TerraUSD, which shows stablecoins need to derive their actual underlying value from centrally backed legal currency like USD,” Sankhanath Bandhyopadhayay, chief economist, added.
The RBI has been one of the central banks that has been the least bullish about the adoption of cryptocurrencies, arguing that such currencies could “kill” private cryptocurrencies.