The chief economic adviser to the Indian government has warned of innovations such as cryptocurrencies and decentralized finance (defi) in the absence of regulation. “Perhaps we are not fully aware or do not understand what forces we are releasing ourselves,” he says.
Indian government chief economic adviser skeptical of Crypto, Defi and decentralization
India’s Government Chief Economic Adviser (CEA) V. Ananta Nageswaran reportedly warned of the dangers of cryptocurrencies and the risks associated with a lack of regulation on Thursday at an Assocham event. Regarding cryptocurrency, local media quoted him as saying:
The more decentralized they become, and the lack of a watchdog or centralized regulator also means there is a Caribbean pirate or winner-take-all world in terms of being able to really take everything from someone else.
The economic adviser to the government explained that he had reached an agreement with the Deputy Governor of the Reserve Bank of India (RBI) T. Rabi Sankar on crypto and decentralized finance (defi). An RBI official warned that there currently appears to be regulatory arbitrage in regards to cryptocurrencies and defi, rather than true financial innovation.
Referring to defi, Nageswaran opined:
In my opinion, although it is considered an innovation, I would reserve the right to judge whether it is really innovative or really destructive in a positive way, or is it something that we will regret.
Commenting on whether cryptocurrency could become an alternative to fiat currencies, the economic adviser emphasized that it “should serve many purposes.” He elaborated: “It must be a store of value, it must be widely accepted and it must be a unit of account… In all these cases, new ‘innovations’ such as cryptography or defi have not yet passed the test. “.
So I wouldn’t be very excited about them, because sometimes we may not be fully aware or aware of what forces we are releasing ourselves.
“I would be somewhat cautious in my welcome to some of these fintech breakthroughs like defi, crypto, etc,” he noted.
The Government of India is currently working on the country’s crypto policy. The Ministry of Finance held consultations with the International Monetary Fund (IMF) and the World Bank on the regulation of cryptocurrencies. The Securities and Exchange Board of India (SEBI) said last week that the decentralized nature of cryptocurrencies makes regulation difficult.
Meanwhile, India’s central bank remains skeptical of crypto. On Friday, RBI Governor Shaktikanta Das warned investors against trading cryptocurrencies, reiterating that they “pose huge risks to financial stability.”
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