RBI Governor Issues Crypto Warning After Terra's LUNA, UST Collapse

Shaktikanta Das, the governor of the Reserve Bank of India has stated in an interview that the country's central bank has rightly been cautioning against cryptocurrencies, following the collapse of Terra's UST and LUNA. On May 15, RBI officials warned that with most cryptocurrencies denominated by the US dollar, it could lead to the dollarisation of the country's economy. The officials stressed that dollarisation is against the country's sovereign interest while maintaining that digital assets pose a threat to India's financial stability.

Das told CNBC TV18 in an interview on Monday that if crypto had been regulated in India leading to the recent disaster revolving around the Terra ecosystem, investors would have questioned the effectiveness of the law. While the Indian government has often said that it will not shut out crypto completely, the central bank has called for a ban on multiple occasions.

“This [crypto] is something whose underlying [value] is nothing. There are big questions on how do you regulate it. Our position remains very clear, it will seriously undermine the monetary, financial, and macroeconomic stability of India,” the governor said.

The RBI governor added that the country's central bank and government are "in sync" on their stance on crypto regulation because the government is "equally concerned."

"We have conveyed our position to the government and they will take a considered call," he said.

Additionally, a question was posed to Das regarding the assertion that was made by Brian Armstrong, the CEO of Coinbase. Armstrong claimed that Coinbase India disabled payments by the Unified Payments Interface (UPI) just a few days after launch due to “informal pressure” from the RBI.

The governor responded he did not want to comment on the hypothetical remarks offered by those from the outside.

As things stand, the Indian crypto sector is completely unregulated. The Indian Finance Ministry is conducting meetings with different financial entities such as the International Monetary Fund, World Bank, the Reserve Bank of India, as well as the Securities and Exchange Board of India (SEBI).