Reserve Bank of India (RBI) Governor Shaktikanta Das lashed out at Stablecoins and other cryptocurrencies at the G30 39th Annual International Banking Seminar held in Washington DC on Sunday, wherein he said he is uncomfortable with the idea of “private money” dominating the payment system and ending the sovereignty of local governments.
Das praised the concept of Central Bank Digital Currencies (CBDCs), hailing them as the future of fiat currencies, and said that India has received positive response to the CBDC pilot projects. Das’ comments come in the wake of Indian government deliberating on a discussion paper on crypto regulations. India has one of the highest tax slabs on crypto earnings even though it remains unregulated and there have been media reports that the government might put an all together ban on crypto to promote CBDCs.
“It’s interesting how we have to add that prefix of ‘stable’ before stablecoins. I have a fundamental question and very strong reservations against stablecoins. Stablecoin is private money, are we comfortable allowing it to dominate the payment ecosystem or we should let fiat currency issued by sovereign governments to do the same,” said Das.
Das also stressed that private currencies like stablecoins and cryptocurrencies might pave the way for a few multi-national companies to dominate the payment ecosystem thereby leading to loss of currency sovereignty of local governments. Readers can watch the entire conference on Youtube.
“Secondly, there is no settlement risk associated with fiat currency, it is a finality, once I pay CBDC to anyone , its money backed by the government and central bank. There is no need for collateral, and its finality. Compared to CBDCs, what is the great advantage that stablecoins has? I am very uncomfortable with them, I frankly don’t see any advantages and I see a lot of risks. I see a situation where only large companies, that are set in particular countries dominating the ecosystem and that raises huge concerns about individual governments losing their sovereign control over their monetary system,” said Das.
Das also heaped praises on CBDC and stressed the need to promote it as the future of paper money with several use cases including faster trans-national payments.
“India is one of the pioneering countries where United Payment Interface (UPI) has ensured high efficiency in payment systems. Payments are safer, faster, instant and cheaper and there are 500 million transactions per day on UPI. Now, we are looking at the interoperability between UPI and CBDCs. India has already launched pilot projects on CBDCs two years ago and have received positive response over it. But we are in no great hurry to launch a nationwide roll-out of CBDCs as we want to run trials first and fully convince ourselves regarding the design, features, security and robustness of CBDCs,” said Das.
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