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Central Bank of India sees cryptocurrencies as a (small) "threat" to financial stability



 In its latest status report on the country's financial stability, the Central Bank of India (RBI) has renewed its criticism of cryptocurrencies. To that end it says:


“We need to be aware of the risks that are looming on the horizon now. Cryptocurrencies are clearly a danger. Anything that derives value from mere wishful thinking, with no intrinsic value, is just speculation by some other name.”

In addition, decentralized cryptocurrencies would be specifically “designed to circumvent the financial system and all related controls”, including anti-money laundering (AML) and counter-terrorism financing (CTF) and customer authentication (KYC) measures. Building on well-known points of criticism , the RBI also points out that private currencies often lead to instability and undermine the institution of state control of money.


Ironically, despite all this harsh criticism, cryptocurrencies rank at the lower end of the risk scale in RBI's management report. In this ranking, the central bank ranks the greatest threats to financial stability based on a number of factors that could adversely affect the stability of the global financial system.


Crypto sits at the bottom end of the rankings with threats such as nation-state gradation, political uncertainty, and terrorism. The central bank cites the fact that the crypto industry is still relatively small in a global comparison and is not yet integrated into the traditional financial system on a large scale as the reason for this relatively low level of risk of cryptocurrencies.


Currently, cryptocurrencies are estimated to comprise between 0.4% – 1% of the total global wealth of 469 trillion. U.S. dollar. Experience has shown that the RBI is one of the most critical central banks with regard to crypto, so it recently announced that central bank digital currencies (CBDC) could “ kill ” crypto currencies in the future.

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