Shaktikanta Das, the Governor of the RBI, issued a warning that there was a possibility of the crypto market crash, which would see small investors lose their money.
He also added that they believe the warnings of the central bank have deterred a number of people from investing their money in cryptocurrencies.
The Reserve Bank of India (RBI)’s governor talked about the warnings they had issued about crypto investments in an interview earlier this week.
He said that the Indian central bank had cautioned investors on multiple occasions about the risks associated with the crypto investment.
Das stated that they were pleased to have issued those warnings because a large number of people had taken note of the concerns and warnings that the Reserve Bank had highlighted.
He added that he wanted to believe many had not made crypto investments after their warning or pulled out of their investments because of their cautions and comments.
The governor said that they had already mentioned that crypto can result in a great deal of financial instability when it comes to determining the monetary policy of the central bank.
The RBI governor also asserted that crypto can also negatively impact the country’s exchange rate, the capability of their banking sector as well as their capital flows.
In addition, Das also cautioned that crypto could also be used in different illegal activities, such as money laundering and making illegal money transfers.
He reiterated that he had also said at one point that crypto did not have any underlying value at all and was not even worth a tulip.
According to the Indian central bank governor, when something does not have any underlying value, it is not possible for the prices to remain high all the time.
It is inevitable for them to crash and it is the small investors who suffer the most because they lose all their money, making it a big risk for them.
According to Das, cryptocurrencies pose a clear danger. He had warned about crypto back in May when the market was in the midst of a sell-off.
The governor said that they had cautioned against crypto and the collapse of the stablecoin TerraUSD (UST) and the LUNA token was an example of what can happen.
The RBI has recommended a blanket ban on cryptocurrency that should be imposed by the Indian government, including cryptocurrencies like bitcoin and ether.
However, Nirmala Sitharaman, the Finance Minister, said that both regulation and banning crypto in the country can only be effective through international collaboration.
It should be noted that no regulatory framework exists for the crypto market in India for now. The government has been working on a crypto bill for a number of years, but it has not been taken up in parliament.
The finance minister recently cautioned crypto investors, as the authorities are investigating a number of crypto exchanges in the country over money laundering concerns.