Reserve Bank of India Governor Shaktikanta Das has warned that cryptocurrencies should not be allowed to dominate due to the considerable risks they pose to financial stability, monetary stability and the banking sector.

Das highlighted the risks of cryptocurrencies, noting that if central banks lose control over the money supply, managing liquidity and controlling inflation in times of crisis would become a challenge.

He also said that the Reserve Bank of India was one of the first to raise serious concerns regarding cryptocurrencies as major risks to financial stability.

At a time when cyber attacks on Indian websites rose 261% year-on-year in the first quarter of 2024, Reserve Bank of India Governor Shaktikanta Das warned that cryptocurrencies should not be allowed to dominate due to their considerable risks to financial stability, stability monetary and banking sector.

According to a PTI report, Das highlighted the risks of cryptocurrencies, noting that if central banks lose control over the money supply, managing liquidity and controlling inflation during times of crisis would become a challenge.

During his appearance at the Peterson Institute for International Economics, a think-tank, Das said: “I actually think that this is something that should not be allowed to dominate the financial system because it has huge financial stability risks, it has huge monetary stability risks and also pose risks to the banking system. It can create a situation where the central bank could lose control of the money supply in the economy.”

Given the cross-border nature of crypto transactions, he emphasized the need for international cooperation.

“There needs to be an international understanding of this issue, being fully aware of the huge risks associated with cryptocurrencies. It’s not something I think should be encouraged. This view is not a very popular one, but I believe that, as custodians of financial stability, it is a major concern for central banks around the world. Governments are also becoming increasingly aware of the potential downside risks of cryptocurrencies,” said Das.

He also said that the Reserve Bank of India was one of the first to express serious concerns regarding cryptocurrencies as major risks to financial stability and said they had good reasons for this cautious stance.

According to the report, Das emphasized the need to understand the origins of cryptocurrencies, which were designed to bypass traditional systems. He observed that cryptocurrencies possess all the characteristics of money.

He further added that issuing currency is a government responsibility, leading to a broader question about the acceptability of cryptocurrencies working alongside fiat currencies.

The development comes at a time when WazirX has faced a major data breach which resulted in the theft of approximately $230 million worth of digital assets. This attack compromised nearly 45% of WaxirX’s total assets, bringing a debt of $546 million to the crypto exchange. The company also filed an affidavit in the High Court of Singapore in which it released data for more than 240,000 wallet addresses.

A few months after that, government agencies began an investigation into the theft, looking for information about the illegal transfer of crypto tokens from his wallets.