Ranjan advised the Indian government to continue to support the underlying blockchain technology even if the government implemented a complete ban on crypto.
In an interview with CNBC TV-18, Raghuram Rajan, the former Governor of India’s central bank stated that only a handful of cryptocurrencies will survive India’s upcoming crypto legislation out of the 6000-odd tokens being traded in the country’s markets today.
The remarks from the expert come hours after India listed The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 set to be introduced in the Winter session of the parliament.
Ranjan questioned the value that cryptocurrencies possess, comparing the increasing popularity of crypto investments to Netherland’s 17th-century tulip mania:
“If things have value only because they will be pricier down the line, that’s a bubble. A lot of cryptos have value only because there is a greater fool out there willing to buy.”
Ranjan clarified that he did not seek to indicate that cryptocurrencies have no inherent value. However, he believed that most cryptocurrencies did not have a permanent value. Only a few of the cryptocurrencies present today will actually survive to see the days of payments, especially cross-border, using digital currencies, he added.
The ex- Reserve Bank of India governor compared the crypto environment with that of unregulated chit funds:
“Cryptos may pose the same problem as unregulated chit funds which take money from people and go bust, a lot of people holding crypto assets are going to be aggrieved”
Explaining the regulatory issues associated with crypto, Ranjan said that cryptocurrency in the United States is a “2.5 trillion problem that nobody really wants to regulate”. He added that part of the problem with regulation was lawmakers lack of understanding of the crypto space.
Ranjan stated that he was unsure if Bitcoin would cause Forex issues and pointed out that Bitcoin mined in India could be source of regulatory issues. He further explained that the major concern surrounding crypto was how the investors could suffer if assets lose a lot of value over time.