Cryptocurrencies are clear danger, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Thursday, adding anything that derives value based on make believe, without any underlying, is just speculation.
The RBI's 25th Financial Stability Report (FSR) said the growing threat of the crypto-assets ecosystem warrants drastic approaches by national authorities.
Several vulnerabilities associated with the crypto asset markets have been highlighted such as linkages between crypto asset markets and the regulated financial system, the central bank further said.
RBI has been flagging concerns about cryptocurrencies, which are seen as a highly speculative asset.
The Centre is in the process of finalising a consultation paper on cryptocurrencies after gathering inputs from various stakeholders and institutions.
“Identification and quantification of risks posed by crypto-assets face data gap challenges," the RBI added.
The report also said, “The aggressive tightening of monetary policy in response to the accentuating inflationary pressures presages a major shift in global liquidity conditions and repositioning has started affecting global financial flows."
“One of its early ramifications is reflected in the crypto ecosystem with one stablecoin losing almost all its value and another de-pegging from the US dollar, underscoring the need for regulatory guardrails to ensure financial stability and consumer and investor protection," it added.
Regarding the banking sector, the RBI said the Capital to Risk weighted Assets Ratio (CRAR) of Scheduled Commercial Banks (SCBs) rose to a new high of 16.7% while their Gross Non Performing Assets (GNPA) ratio fell to a six-year low of 5.9% in March 2022.
The central bank also said the Indian economy is well on the path of recovery even though inflationary pressures and geopolitical risks warrant careful handling and close monitoring of the situation.
Banks as well as non-banking financial institutions have sufficient capital buffers to withstand shocks, the report said.
"Notwithstanding the challenges from global spillovers, the Indian economy remains on the path of recovery, though inflationary pressures, external spillovers and geopolitical risks warrant careful handling and close monitoring," it said.