RBI chief says cryptos a threat to macroeconomy, refers to 17thC ‘tulip mania’

Reserve Bank of India (RBI) governor Shaktikanta Das on Thursday said private cryptocurrencies were a threat to macroeconomy and financial stability, and would undermine the central bank’s ability to deal with challenges on the two fronts.

In a message for investors, Das said such assets have no underlying whatsoever, “not even a tulip”.

In the Union Budget presented on February 1, finance minister Nirmala Sitharaman announced a 30 per cent tax on gains made on such assets, besides stating that the RBI will start issuing the country’s first digital currency in 2023.

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Das, who presented the first monetary policy statement after the Union Budget 2022-23, said, “Private cryptocurrencies or whatever name you call it are a threat to our macroeconomic stability and financial stability. They will undermine the RBI's ability to deal with issues of financial stability and macroeconomic stability.”

Stating that it was his “duty” to caution investors, the RBI governor urged them to keep in mind that they are investing at their own risk.

Das said, “They also need to keep in mind that the cryptocurrency has no underlying, not even a tulip”. Das was referring to the 'tulip mania' of the 17th Century that is often cited as a classic example of a financial bubble, where the price of something goes up, not due to their intrinsic value but because of speculators wanting to make a profit by selling a bulb of the exotic flower.

(With inputs from agencies)