Just days after India’s central bank backed a ban on the crypto sector, again, Raghuram Rajan gave a nod to the thought that the underlying technology behind cryptocurrencies must be explored. Speaking in Davos at the World Economic Forum (WEF), the former governor of the Reserve Bank of India (RBI) said that while the crypto sector had faced deserved scrutiny and decline, the technology driving digital assets like cryptocurrencies were an enticing next-gen fintech tool that could be experiment with. A famed economist, Rajan served as the 23rd chief of the RBI between 2013 and 2016.
“I don’t think you want to rule out this technology and say it has failed as a speculative asset. I think it’s had its comeuppance. But I think as a technology, I don’t think we’ve seen the limits of it,” a Coindesk report quoted Rajan as saying.
The global crypto industry slipped into a major downfall and dropped from its trillion-dollar valuation to as low as a little below $800 billion (roughly Rs. 65,20,496 crore) in the second half of 2022.
Promising crypto projects like Terra and FTX suffered liquidity crunches and dramatically fell apart, leaving investors high and dry. In addition, plethora of hack attacks scared a big part of the remaining investors away. In the backdrop of these circumstances, crypto firms as established as Binance also resorted to announcing staff cuts. A number of firms, including Celsius and Voyager also declared bankruptcies.
The governments of several nations, including India, are currently working to regulate the digital assets industry and safeguard it against market turbulences.
As per Rajan, the crypto players must refrain from advertising these assets as an ‘inflation-resistant’ alternative to the already existing fiat currencies. Instead, Rajan said, people must work on developing crypto’s underlaying blockchain technology.
He has reportedly already clarified that, for now, he does not see any large scale uses for the crypto sector.
“The notion that these are stable forms of payment relative to the fiat currencies, the central bankers cannot be trusted but this crypto can be trusted, belongs to a small minority of people. So broadly I am saying there is no large-scale use case at present; there are niche use cases.”
Earlier this week, RBI’s present governor Shaktikanta Das said that investing in crypto was the same as gambling. “Every asset, every financial product has to have some underlying (value) but in the case of crypto there is no underlying and the increase in the market price of cryptos, is based on make-believe. So anything without any underlying, whose value is dependent entirely on make-believe, is nothing but 100 per cent speculation or to put it very bluntly, it is gambling,” Das, while backing a ban on crypto, was quoted as saying.
India will get its annual budget for this year in February and guidelines around engaging with the crypto sector are expected for over a year now. As for now, crypto trading is allowed and taxed in India.