Indian Central Bank Governor Warns of Potential Crypto Market Collapse and Losses for Small Investors

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Shaktikanta Das, governor of the RBI, has issued a warning that small investors may lose money if the cryptocurrency market crashes. He continued by saying that the central bank thought its warnings had discouraged many people from making cryptocurrency investments.

The governor of the Indian central bank, the Reserve Bank of India (RBI), Shaktikanta Das, warned about investing in cryptocurrency in an interview with ET Now earlier this week.

Noting that the RBI has cautioned investors on several occasions about the risks of investing in crypto, Das said: “I’m happy that we sounded those warning signals and I would like to believe that a large number of people would have taken a note of the warning signals and the concerns expressed by the Reserve Bank.” He added:

I would like to believe … that many people did not invest in crypto or sort of pulled out of crypto thanks to the cautions and concerns that emanated out of the Reserve Bank.

“Crypto, you know, we have said it earlier, it can create a lot of financial instability in terms of the ability of the central bank to determine monetary policy,” the RBI governor continued. “It will also have an adverse impact on our exchange rate, on capital flows, on banking sector stability.”

Furthermore, Das cautioned that cryptocurrency has the “potential for being used as a tool for money laundering and for illicit transfer of money.” He also reiterated his earlier statement: “In fact, I said at one point that it doesn’t have any underlying, not even a tulip.”

The Indian central bank governor opined:

Something which doesn’t have an underlying, the prices will not remain high all the time so therefore it may crash, and it has crashed, ultimately … it is the small investors who lose money so therefore it is a big risk for the small investors.

Das stated that cryptocurrencies clearly pose a threat in July. He issued a crypto warning in May as the market was falling. The collapse of cryptocurrency terra (LUNA) and stablecoin terra USD led to the governor saying, “We have been warning against crypto, and look at what has happened to the crypto market now” (UST).

The RBI has suggested that the Indian government outlaw cryptocurrencies like ether and bitcoin. Nirmala Sitharaman, the finance minister of India, asserted that international cooperation is essential for regulation and prohibition to be successful.

India still doesn’t have a specific regulatory framework for cryptocurrency. The Indian government has been working on a crypto bill for several years but it has yet to be taken up in parliament. Recently, the finance minister asked crypto investors to exercise caution as authorities investigate a number of crypto exchanges in money laundering probes.