RBI ranks crypto near the bottom of systematic risks despite harsh criticism

Image: Shutterstock[b]

Despite its growing popularity, the Reserve Bank of India (RBI) remains sceptical about crypto assets. In the financial stability report published on Thursday, RBI stated that the crypto assets and decentralisation are fashioned to surpass the financial system and its control with the Central Bank as well as the Anti-Money Laundering, Know Your Customer and Combating Financial Terrorism techniques.

Of the approximate $469 trillion financial assets in the whole world, crypto-assets hold around 0.4 per cent to 1 percent of it. Yet T Rabi. Shankar, the Deputy Governor of RBI at the International Monetary Fund (IMF) conference, stated that RBI is critical about adopting the digital assets claiming that Central Bank Digital Currencies or CBDCs have the ability to “kill” the private crypto.

Further, RBI noted, that the risks emerging from the utilisation of crypto assets cannot be ignored, "Cryptocurrencies are a clear danger. Anything that derives value based on make believe, without any underlying, is just speculation under a sophisticated name."

In the previous bulletin concerning a similar issue, RBI said that private currencies give rise to instability and overpower the sovereign control of the money supply.

Notwithstanding the scepticism expressed by the Central Bank of India regarding crypto assets, it remains the least of the concerns for the Central Bank. On the lines of the systemic risk survey, RBI is keenly focused on the issues of geopolitical tensions, growing headwinds and rising prices of goods. According to the RBI, these prominent problems require more attention as they can bring instability to the global financial system.

Ironically, risks posed by the trending digital assets and sovereign rating downgrades held the bottom position on the risk-weighted scale. The risks of political uncertainty and terrorism threat are a little lower than the risks posed by digital assets.