India's Central Bank Warns Crypto Could Threaten State Financial Stability

JAKARTA – The central bank of the India Reserve Bank of India (RBI) said crypto has no underlying (basic asset). The warning was delivered by the head of RBI Shaktikanta Das after the Indian government decided on the tax framework related to crypto.

Reported by Reuters, Das considered that cryptocurrencies issued by private parties and not central banks were a big threat that had the potential to shake financial and macro-economic stability. Therefore, investors should be warned about the risks of crypto investing.

“Private (developed) cryptocurrencies are a huge threat to macro-economic stability and financial stability… investors should be warned that they are investing at their own risk,” Das said at a press conference after the monetary policy meeting.

“And these cryptocurrencies have no underlying (value) – not even tulips,” Das added.

Tulip Das refers to events that occurred in the Netherlands in the 1600s, which became a parable for human greed. At that time, investors invested in tulips because the demand was soaring. Not long after, the price of tulips plunged, causing investors to suffer losses.

After Indian central bank officials warned that cryptocurrencies developed by outsiders could undermine financial stability, RBI plans to launch its own digital currency. The digital rupee is rumored to be launching in 2023.

To date crypto investors in India are estimated to be around 15 million to 20 million investors. In total, their crypto holdings are worth 400 billion rupees, or around IDR 76 trillion.

Therefore, in the midst of the explosion of cryptocurrencies in various parts of the world, novice investors are expected to conduct independent research or DYOR (Do Your Own Research) and study it first before investing their money in crypto given the very high volatility.