RBI Warns Against Crypto Dominance Amid Surge In Cyberattacks

At a time when cyberattacks on Indian websites have surged 261% year-on-year in the first quarter of 2024, the Reserve Bank of India’s governor Shaktikanta Das has warned that cryptocurrencies should not be allowed to dominate due to their considerable risks to financial stability, monetary stability and the banking sector.

As per 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 in times of crisis would become challenging. 

During his appearance at the Peterson Institute for International Economics, a think tank, Das said, “I am actually of the opinion 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 it also poses risks to the banking system. It may 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 emphasised the need for international cooperation.

“There has to be an international understanding on this issue, being fully mindful of the huge risks associated with cryptocurrencies. This is not something which I feel should be encouraged. This view is not a very popular one, but I think as custodians of financial stability, it is a major concern for central banks worldwide. Governments are also becoming increasingly aware of the possible downside risks in cryptocurrencies,” Das said.

He further shared that the Reserve Bank of India has been one of the earliest to raise serious concerns, viewing cryptocurrencies as major risks to financial stability, and said they have strong reasons for this cautious stance.

As per the report, Das emphasised the need to understand the origins of cryptocurrencies, which were designed to bypass traditional systems. He noted that cryptocurrencies possess all the characteristics of money.

He further added that currency issuance is a government responsibility, prompting a broader question about the acceptability of cryptocurrencies functioning alongside fiat currencies.

The development comes at a time when WazirX faced a major data breach that resulted in the theft of approximately $230 Mn worth of digital assets. This attack compromised almost 45% of WaxirX’s overall assets, bringing a liability worth $546 Mn on the crypto exchange. The company also filed an affidavit in the High Court of Singapore wherein it released data of over 240,000 wallet addresses.

Months after that government agencies started an investigation into the heist, seeking information on the illegal transfer of crypto tokens from its wallets.