RBI Governor on cryptocurrency

November 11, 2021

Governor of Reserve Bank of India (RBI), Shaktikanta Das raised alarm on cryptocurrencies and cautioned investors on potential pitfalls of digital currency.

Highlights

From a macro economic and financial stability point of view, cryptocurrencies are of serious concern.
Governor’s comment has come at a time when craze of cryptocurrencies has increased among Indian investors.
Craze has increased in India, after Supreme Court turned down RBI’s order of banning cryptocurrency trading in India.
Union government has also not yet enacted any law on cryptocurrencies. It is currently consulting with experts. After several rounds of discussion, government largely want to set limits on cryptocurrencies trading in India.

What is cryptocurrency?

Cryptocurrency is the collection of binary data. It is designed to work as a medium of exchange. In such system, individual coin ownership records are stored in a ledger. Ledger is a computerized database using strong cryptography for securing transaction records. Ledger also control creation of additional coins and verify transfer of coin ownership. Cryptocurrencies are generally fiat currencies because they are not backed by or convertible into a commodity.

Does cryptocurrency exist in physical form?

Cryptocurrency does not exist in physical form as paper money does. It is not issued by a central authority. Cryptocurrencies use decentralized control as opposed to central bank digital currency (CBDC).