RBI Governor Sanjay Malhotra outlines India's careful approach to cryptocurrencies, advocating for underlying technologies like DLT while addressing global economic challenges such as rising public debt and hardening bond yields.
Key Points
- India maintains a cautious approach towards cryptocurrencies due to concerns over monetary sovereignty, monetary policy, and capital flows.
- The Reserve Bank of India actively promotes underlying technologies like distributed ledger technology (DLT) and tokenisation.
- Cross-border payments are identified as a significant challenge, with central bank digital currencies (CBDCs) being explored as a potential solution.
- Rising global public debt and hardening bond yields are attributed to increased government and private sector spending, partly driven by artificial intelligence.
- The RBI's monetary policy primarily focuses on domestic growth-inflation dynamics, but global interest rates significantly impact India's real interest rates.
India has maintained a cautious approach towards cryptocurrencies while promoting the underlying technologies such as distributed ledger technology and tokenisation, RBI Governor Sanjay Malhotra said on Saturday.
Malhotra said India supports innovation in technologies underlying crypto assets, including distributed ledger and tokenisation, but remains cautious about cryptocurrencies due to concerns over monetary sovereignty, monetary policy and capital flows.
"So, our approach has been to promote the underlying technologies, and we are using some of these in the central bank and outside in PPP (public-private partnership) mode. But insofar as crypto is concerned, it has been a cautious approach," he said at the Kautilya Economic Conclave.
India's Cautious Crypto Approach
Expressing concerns about cryptocurrencies, the RBI Governor said it is related to the 'singleness of money' and their potential implications for monetary policy, particularly in emerging market economies, where capital flow restrictions are in place.
"The problem that you are trying to address is primarily not so much of domestic payments, because domestic payments within our country and in many countries now are quite fast, cheap and convenient," he said.
The more significant challenge is cross-border payments, for which other solutions, including central bank digital currencies (CBDCs), can be explored, he said.
Addressing Global Economic Challenges
On rising public debt and hardening bond yields globally, Malhotra said the yield movement is essentially a function of demand and supply, with government and private-sector spending rising, including on account of artificial intelligence (AI).
"Money is scarce, spending has increased, both by the government as well as private enterprises, led by AI, and so that's what is leading to the hardening of the bond yields and debts," he said.
RBI's Monetary Policy Focus
Malhotra said the RBI's monetary policy primarily focuses on domestic growth-inflation dynamics.
But global interest rates also have implications for India, including through their impact on real interest rates in the country.
"That is something that we need to take care of," he said.
