RBI warns of cryptocurrency dominance amid surge in cyber attacks

Reserve Bank of India Governor Shaktikanta Das has warned that cryptocurrencies should not be allowed to dominate due to their significant risks to financial stability, monetary stability and the banking sector.

Das highlighted the risks of cryptocurrencies, noting that if central banks lose control of the money supply, managing liquidity and controlling inflation during a crisis will become difficult.

He also said that the Reserve Bank of India was one of the first to express serious concerns, viewing cryptocurrencies as a serious risk to financial stability.

At the time when cyber attacks on Indian websites rose 261% year-on-year in the first quarter of 2024, Reserve Bank of India Governor Shaktikanta Das warned that cryptocurrencies should not be allowed to dominate due to their significant risks to financial stability, monetary stability and the banking sector.

According to a PTI report, Das highlighted the risks of cryptocurrencies, noting that if central banks lose control of the money supply, managing liquidity and controlling inflation during a crisis will become difficult.

During a speech at the Peterson Institute for International Economics, a think tank, Das said: “I’m actually of the view that this should not be allowed to dominate the financial system because it has enormous risks to financial stability, it has enormous risks.” risks of monetary stability and also create risks for the banking system. This could create a situation where the central bank could lose control of the money supply in the economy.”

Given the cross-border nature of cryptocurrency transactions, he emphasized the need for international cooperation.

“There is a need to reach international understanding on this issue, being fully aware of the enormous risks associated with cryptocurrencies. I believe this is not something that should be encouraged. This view is not very popular, but I believe that as custodians of financial stability it is a major concern for central banks around the world. Governments are also increasingly aware of the possible downside risks of cryptocurrencies,” Das said.

He also said that the Reserve Bank of India was one of the first to express serious concerns regarding cryptocurrencies as a serious risk to financial stability and said that they have good reasons for such a cautious stance.

According to the report, Das emphasized the need to understand the origins of cryptocurrencies, which were created to bypass traditional systems. He noted that cryptocurrencies have all the characteristics of money.

He also added that issuing currency is the responsibility of the government, which raises a broader question about the acceptability of cryptocurrencies operating alongside fiat currencies.

The development comes at a time when WazirX is facing a problem serious data leak This resulted in the theft of approximately $230 million worth of digital assets. This attack compromised nearly 45% of WaxirX’s total assets, resulting in a $546 million liability on the crypto exchange. The company also filed an affidavit in the Singapore High Court in which it disclosed the details of more than 240,000 wallet addresses.

A few months after this, government authorities began investigating the robbery, trying to obtain information about the illegal transfer of crypto tokens from his wallets.