On one February, 2025 Sunday, President Trump announced the formation of a US Crypto Strategic Reserve. He will host the first-ever White House Conference on cryptocurrency. It has shaken up the worldwide crypto enthusiasts. He himself and his family holds substantial crypto assets.
India is cautious about promoting cryptocurrency. The RBI here feels crypto’s unchecked expansion could adversely affect monetary policy, create financial risks and bypass capital flow regulations. If practised excessively, there could be diversion of resources from the real economy –it results into economic instability.
Crypto advocates vouchsafe for its decentralization and financial freedom. The reality is different. Crypto investors fall prey to influencers and stack up high risk assets.
It is to be seen whether RBI mellows down its strict stance.
Crypto currency transfers are opaque. Though official channels could be used to buy cryptos with KYC back-up, what happens to the assets once these are stored in the wallet is dicey. Tracking these transactions is like looking for a needle in the haystack.
Cryptos affect geopolitics too. The developed countries use financial innovations as a tool for diplomacy. If India opts for such a model, it is opting for short-term speculation over long-term stability.
Cryptos thrive in a weak regulatory environment. It shifts to most lenient jurisdictions. These are high-risk traps. The US could trigger a wave of capital flight. Investors think they have entered a stable market. Crypto crashes leave investors in financial ruin.
India has built a robust finance eco-systems — UPI, Aadhar-enabled payments and the digital rupee. These should be expanded and strengthened. India should not encourage unregulated digital assets. It is not an issue of managing the risks today, but the issue is to have financial future against chaotic speculation.
No doubt, the RBI is doing a thankless job, but it is crucial. It has to protect us from financial shocks.
The White House can have a crypto party. We are better off while exercising sobriety.
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