Reserve Bank of India (RBI) Governor Shaktikanta Das, on Friday, reaffirmed the central bank’s unwavering position on the prohibition of crypto assets. Despite a global trend toward regulating cryptocurrencies, Das made it clear that the RBI’s stance on the matter remained unchanged. Speaking to reporters at the Kautilya Economic Conclave 2023, he emphasised the risks associated with cryptocurrencies and the need for regulation.
A Graded Approach to Regulation
Das explained that regulation exists on a scale from zero to ten, where zero means no regulation at all, and ten signifies a complete ban. He reiterated the RBI’s position, suggesting that crypto regulation falls somewhere on this spectrum. The International Monetary Fund-Financial Stability Board (IMF-FSB) synthesis paper, which highlighted the risks of crypto assets, supported this view. However, it is now the FSB’s task to delve into the finer details of crypto regulation.
Hope for Consensus on Regulation Dashed
The crypto industry in India had hoped for government efforts to reach a consensus on regulating crypto assets, especially after the G20 finance ministers and central bank governors adopted a roadmap on crypto assets in a recent synthesis paper. This paper argued against a blanket ban on crypto-related activities, citing the potential challenges and costs of enforcement. Despite this global development, the RBI’s unyielding stance may complicate matters.
Inflation Monitoring and Monetary Policy
Governor Das also touched on inflation and monetary policy in his speech. He highlighted the central bank’s vigilance regarding inflation dynamics, emphasising the importance of anchoring inflation expectations. Retail inflation in India had moderated to 5 percent in September, primarily due to a correction in vegetable prices. Although the RBI had raised the policy repo rate cumulatively by 250 basis points in recent months, it has maintained a pause on policy rates in FY24. Das mentioned the RBI’s commitment to achieving a persistent and sustained decline in inflation, aiming for the 4 percent target.
Impact of Global Factors
Addressing the impact of global factors, Governor Das noted the recent rise in US bond yields, which has broader implications for other economies. He also commented on the elevated crude oil prices in international markets, stating that what primarily matters for inflation in India are pump prices. Despite the strengthening of the US dollar index, the rupee has remained stable. The RBI’s intervention in the foreign exchange market aims to prevent excessive currency volatility.
In his speech, Das underscored the RBI’s commitment to maintaining financial stability as a non-negotiable priority while balancing price stability with growth objectives.
