RBI Governor Sanjay Malhotra stated on Saturday that India maintains a cautious approach to cryptocurrencies while simultaneously promoting the underlying technologies such as tokenization and distributed ledger technology.
Malhotra noted that India supports innovations in the technologies behind crypto assets, including distributed ledger and tokenization. However, he remains cautious about cryptocurrencies themselves due to concerns related to monetary sovereignty, monetary policy, and capital flows.
Speaking at the Kautilya Economic Conclave, he said: 'Thus, our approach has been to promote the underlying technologies, and we are using some of them within the central bank and outside it through public-private partnerships. But when it comes to cryptocurrencies, it has been a cautious approach.'
Expressing his concern over cryptocurrencies, the RBI Governor emphasized that the issue is linked to the 'uniformity of money' and potential consequences for monetary policy, especially in developing economies where capital controls are in place.
He added that the main difficulty is not so much in domestic payments, as domestic transactions in the country and many other countries are now sufficiently fast, cheap, and convenient. A more serious challenge is cross-border payments, for which other solutions can be explored, including central bank digital currencies (CBDCs).
Regarding the growth of government debt and tightening global bond yields, Malhotra explained that the change in yield is essentially a function of supply and demand, which is fueled by increased spending by the government and the private sector, including due to artificial intelligence (AI).
He concluded that 'money is becoming scarce, spending has increased from both the government and private enterprises, driven by AI, and this is what leads to the tightening of bond yields and debt.'
Malhotra also mentioned that the RBI's monetary policy primarily focuses on domestic growth dynamics and inflation, but global interest rates also affect India through their impact on real interest rates in the country, which requires attention.