Cryptocurrencies would be treated as a speculative commodity in India, until, the country introduce a regulatory framework, says the former RBI Governor Raghuram Rajan.
While addressing an online event by Telecom Innovator Sam Pitroda on September 10, Rajan said, “Right now, cryptocurrencies are speculative assets. Will it stay that way? No. There will be developments. Some central banks are thinking of adopting their own cryptocurrency, backed by the full trust and credit of the government.”
He further added that despite being a good technology, cryptos could not replace fiat currency. However, this does not mean that the cryptos market will vanish, it would be there till its (digital assets) fans continue trading them.
Rajan mentioned that cryptocurrencies had been searching for applicants, who could perform tasks efficiently. However, the industry has still not found an effective application.
“No doubt something will come down the line. In the meantime, I think people are valuing cryptos as an asset, bitcoin being the foremost of these. These things are not very effective in making payments yet, certainly not the bitcoin variety,” stated the former RBI Governor.
There are other currencies, which some of the agencies use for facilitating micro-payments at a low cost. Like, when a person reads an article, he/she gets paid. But these payments could be costly in dollars and cheaper in cryptos.
“Some of these may come about and may revolutionize payments, but we are not there yet,” Rajan said, and added: “I would not close the door on cryptos.”
According to him, the idea set by people regarding cryptocurrencies, that it is more reliable than fiat currency, was a bit exaggerated. Rajan mentioned that although there is a limited supply of Bitcoin in the market, that does not give any value to it.
Bitcoin has a volatile nature, its price keeps fluctuating in the market, which makes it very unlikely as a source of payments.
The former RBI Governor said, “We will have to wait for some stable coins. But with stable coins, the problem is we will not know what their true value is, even with some of the more prominent stable coins they are not well-regulated. We don’t know the underlying asset that backs the value of those stable coins. So yet again, it makes it harder to use them widely as a means of payment.”
Presently, India does not have a proper cryptocurrency market but as soon as any breakout technology is introduced, the individuals will find it.