Most cryptocurrencies have an equilibrium value of “exactly zero,” the Reserve Bank of India’s (RBI) Deputy Governor T Rabi Sankar said, even as he highlighted that central bank digital currencies (CBDCs) can “kill” whatever little case there could be for private digital currencies.
Speaking at a webinar organized by the International Monetary Fund (IMF) and reiterating the Indian Central Bank's hawkish stance on cryptocurrencies, Sankar said understanding the limitations of technology is very important to manage the way technology is infused into economies and societies and not fall prey to the hype that technology can create a currency.
“A currency needs an issuer or an intrinsic value. Many cryptocurrencies are neither being accepted at face value not just by gullible investors but also by expert policymakers or academicians. Most cryptos have an equilibrium value of exactly zero but they are still prized, sometimes at fantastical level,” he said.
Unquestioned acceptance of stablecoins puzzling Sankar termed as “puzzling” the unquestioned acceptance of stablecoins like Tether (CRYPTO: USDT) pegged to currencies, asserting that the case for a private currency has not been made anywhere and certainly not the case for the existence of multiple private currencies.
“This and many other reasons explained why we in the RBI have a view that private currencies should not be permitted just because it is backed by hi-tech. We believe that CBDCs would actually be able to kill whatever little case there could be for private cryptocurrencies,” he said.
The Deputy Governor CBDCs have three advantages - better currency management, reducing settlement risks in the system, especially the inter-bank system, and CBDCs can be the best solution to cross border payments.
RBI to introduce CBDCs in stages “However, since there is any international experience to learn from and since CBDCs can have a significant impact on the banking system in terms of banks' ability to mobilize deposits as well as the impact on monetary policy transmission, we would take a measured and a graduated approach to the introduction of CBDCs, We will go through the process of Proof of concept, then pilots and then a stage-wise introduction. We intend to learn as we go.,” Sankar said.
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