RBI Governor Slams Crypto as a Gambling Scheme with No Underlying Value

The central bank chief warns against the risks of crypto mania and calls for a blanket ban on private digital coins.

The Reserve Bank of India (RBI) governor Shaktikanta Das has once again expressed his strong opposition to cryptocurrencies, calling them a “gambling scheme” with no underlying value. He said that the RBI’s position on crypto remains unchanged and that the world or emerging markets cannot take a crypto mania like the Tulip mania.

What is the Tulip mania?

The Tulip mania was a historical episode in the 17th century, when a speculative bubble burst in the Netherlands, causing huge losses for investors who traded in tulip bulbs. The prices of tulips soared to astronomical levels, driven by greed and irrationality. The bubble eventually collapsed, leaving many people bankrupt or ruined.

Das compared crypto to tulips, saying that every asset or financial product has to have some underlying value, but in the case of crypto there is no underlying value. He said that the increase in the market price of cryptos is based on “make-believe” and that it is not even worth even a tulip.

Why does RBI oppose crypto?

Das has repeatedly voiced his concerns about the potential dangers of crypto for financial stability, monetary policy, consumer protection, and financial sovereignty. He has also questioned whether cryptocurrencies should be classified as products, financial assets, or something entirely different due to their intangible nature.

He said that traveling down that path will create huge risks and that he does not think the world or emerging markets can take a crypto mania like the Tulip mania. He also said that he does not see any upside in regulating the crypto industry and asked how one would regulate it, whom one would regulate, and what one would regulate.

He pointed out the lack of a clear, universally accepted definition of what cryptocurrencies represent and whether they should be subject to anti-money laundering (AML) rules or tax obligations. He also said that there is no legal framework for dealing with cross-border transactions involving cryptos and that there are many challenges in ensuring consumer protection and investor education.

What are India’s plans for crypto?

India’s crypto community has been lobbying for more clarity and regulation from the government for a long time. However, there is still a lot of uncertainty on how the government will proceed. In November 2023, India agreed to bring regulations to the industry at an international meeting of G20 countries. However, there are still many details to be worked out.

In February 2022, RBI Deputy Governor T. Rabi Sankar said that an outright ban on cryptocurrencies is perhaps the most apt choice for India. In 2018, RBI had effectively banned Indian banks from supporting or engaging in crypto transactions. However, this order was overturned by the Supreme Court in 2020.

The central bank is also said to be responsible for a “shadow ban” in which payment processors were cut off from local crypto exchanges. Das has also said that he would not like to comment on speculative observations made by individuals outside.