Most Existing Cryptocurrencies Won’t Survive, Says Former RBI Governor Raghuram Rajan

According to Rajan, it was not as if cryptocurrencies had no value at all, just that most of them did not have permanent value

Former RBI Governor Raghuram Rajan. Photo: Getty

New Delhi: Former RBI Governor Raghuram Rajan on Wednesday said of the 6,000-odd cryptocurrencies in existence today, only one or two, or at most, only a handful would survive.

In an interview with CNBC-TV18, the former RBI governor said, “If things have value only because they 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.” He compared the current mania in cryptocurrencies to the tulip mania in the Netherlands in the 17th century.

“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,” he said.

According to Rajan, it was not as if cryptocurrencies had no value at all, just that most of them did not have permanent value. Also, some of them would survive to provide payments, especially cross border payments.

Rajan was not alone in voicing concerns over cryptocurrency dealings in India. RBI Governor Shaktikanta Das recently has also issued warnings on cryptocurrency trading. Das in his address has opined for a strong and formal framework to regulate cryptocurrency dealings in India.  

The Centre is all set to introduce a Bill to regulate cryptocurrencies during the winter season of Parliament. A comprehensive Bill on the digital currencies is likely to be tabled for the Cabinet approval.  

Rajan also said, “In the US, crypto is a $2.5 trillion problem that nobody really wants to regulate,” adding that the problem was partly due to regulators not fully understanding this space and how to regulate it. What governments can insist on is getting information from crypto entities, when crypto entities get too big, government can examine them more closely to ensure there isn’t fraud. This is a situation where at best you can send warnings to the broader public,” he added.