Cryptocurrencies, which have not yet achieved legal tender status in most of the world, have a “potential future” if carefully regulated, according to Raghuram Rajan, India’s former governor and former chief economist at the International Monetary Fund.
Although Rajan sounded optimistic about well-regulated stable coins, he cautioned that it was not obvious what other factors were supporting their valuations than a “heady environment” with cheap monetary policy driving all asset prices.
He said this on Wednesday on the Reuters Global Markets Forum. His views differ from those of the current Reserve Bank of India government, which has consistently advocated a ban on all digital currencies except those issued by the government.
Raghuram Rajan Declaration on Cryptocurrency
Instead, central banks should focus on the financial stability of green investments, as well as other concerns like cryptocurrencies and cybersecurity, according to Rajan.
Rajan believes that the values of cryptocurrencies will continue to rise, but they will need to find appropriate use cases to reach their full potential. Market buzz and cheap monetary policy aside, he’s skeptical of the fundamentals that support cryptocurrency valuations.
Rajan added that “Many cryptos are currently valued not so much as a means of payment, but as assets in their own right, in this heady climate with really rising asset prices“. Stablecoins or cryptocurrencies that are linked to fiat currencies such as the US dollar or the euro are more attractive to Rajan.
He called for appropriate stablecoin regulations to be implemented as soon as possible. According to Rajan, the value of cryptos should be assessed in terms of their future usefulness. He said that I am not predicting an implosion of Bitcoin any time soon.
But I am saying that I have a lot more confidence in the value of these cryptos when they find appropriate use cases, and the technology is heading in that direction. The Reserve Bank of India, which has long advocated a ban on all private virtual currencies, contradicts Rajan’s position. The law regulating cryptocurrency in India is currently seeking cabinet approval.