2022 wasn’t a particularly favourable year for cryptocurrencies across the globe. Events such as the LUNA crash in June to the FTX collapse in November last year has left an adverse impact on crypto prices, leading to an unprecedented number of sell-offs and the wipeout of nearly $1.4 trillion from the crypto market. As per former Reserve Bank of India (RBI) Governor Raghuram Rajan, the crypto meltdown over the past year will allow investors to focus on the “true value” of the overall digital assets sector.
On the sidelines of the World Economic Forum summit in Davos, Switzerland, Rajan said during an interview with Reuters Global Markets Forum, “The idea that somehow cryptos are going to maintain value, while the fiat currencies collapse. That’s nonsense.”
Rajan added, “Fiat currencies have won out in terms of which is more credible.”
The former RBI chief’s comments falls in line with those of the banking regulator’s current head, Shaktikanta Das, who warned that if private cryptocurrencies are allowed to grow, they could be the next major financial crisis.
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Speaking at the BFSI Insight Summit 2022, Das said that private cryptocurrencies were created to bypass the system, to find a way around central bank currencies. “There’s no credible argument about what public good it does, or what public purpose it serves,” noted Das as he said that private cryptocurrencies are a completely speculative activity. “I still hold the view it should be prohibited.”
“If you allow it to grow, mark my words, the next financial crisis will come from private cryptocurrencies,” he said.
Das added that cryptocurrencies do not have any underlying value, and that they pose “huge inherent risks” to the financial stability of India.
“Change in value of any so-called product is the function of the market, but unlike any other asset, our main concern about crypto is that it doesn’t have any underlying [value] whatsoever,” he said. “As a term, cryptocurrency is a fashionable way of describing what is otherwise a 100 percent speculative activity.”
Das also noted that the latest FTX meltdown has caused a wipeout of nearly $40 billion from the market. “After the episode of FTX, I don’t think we need to say anything more.”
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Cryptocurrencies are yet unregulated in India and are clubbed under virtual digital assets (VDAs) in the country, attracting taxation of 30 percent on all gains as well as an additional TDS of 1 percent.
It remains to be seen what the upcoming Union Budget 2023 will bring to the crypto table.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.