RBI remains cautious on crypto, backs underlying technology: Governor Sanjay Malhotra

Reserve Bank of India Governor Sanjay Malhotra expressed a cautious attitude towards cryptocurrencies while endorsing the advancement and utilization of technologies that underpin them, according to a PTI report. The RBI Governor made these remarks at the Kautilya Economic Conclave.

Malhotra highlighted the country's support for innovation involving distributed ledger technology and tokenization, noting that some of these technologies are being examined by the central bank through public-private partnerships. However, he emphasized that cryptocurrencies raise concerns related to monetary sovereignty, monetary policy, and capital flows, particularly for emerging economies.

The debate surrounding crypto assets, Malhotra explained, is tied to the concept of the 'singleness of money' and the potential impact of alternative forms of money on monetary policy. He noted that the primary issue cryptocurrencies are meant to address is not domestic payments, as these have become fast, inexpensive, and convenient in India and several other countries.

The more pressing challenge, according to Malhotra, lies in cross-border payments, where alternative solutions like central bank digital currencies (CBDCs) could be explored.

Malhotra also discussed the rise in global public debt and rising bond yields, attributing the trend primarily to demand and supply conditions. He pointed out that both government and private-sector spending have increased, with spending related to artificial intelligence (AI) contributing to higher demand for funds. Malhotra stressed that India's monetary policy remains focused on domestic growth and inflation conditions, but global interest rate movements are also crucial as they can affect real interest rates in India.

The RBI, therefore, must remain vigilant about international interest-rate changes while formulating monetary policy for domestic economic conditions.