Most cryptocurrencies won't survive; pose same problem as unregulated chit funds: Raghuram Rajan
New Delhi, Nov 24: The former Reserve Bank of India (RBI) governor Raghuram Rajan said of the 6,000-odd cryptocurrencies in existence today, only one or two will survive in future.
In an interview with CNBC-TV18, Rajan said"If things have value only because they will be pricier down the line, that's a bubble." "...a lot of cryptos have value only because there is a greater fool out there willing to buy."
Rajan said that cryptos may pose the same problem as unregulated chit funds, which take money from people and go bust. "A lot of people holding crypto assets are going to be aggrieved," he said.
"In the US, crypto is a $2.5 trillion problem that nobody really wants to regulate," said Rajan adding that the problem was partly due to regulators not fully understanding this space and how to regulate it.
Currently, around 6,000 cryptocurrencies are in existence and Rajan believes that only one or two, or at most a handful, would survive, he said.
India is set to pass Cryptocurrency and Regulation of Official Digital Currency Bill, that seeks to ban all but a few private cryptocurrencies to promote underlying technologies while allowing an official digital currency by RBI.T
The draft Bill bans all cryptocurrencies based on the risks associated with them such as potential use for money-laundering, risks to consumers and threat to the country's financial stability.
The draft Bill bans the use of cryptocurrency as legal tender or currency. It also prohibits mining, buying, holding, selling, dealing in, issuance, disposal or use of cryptocurrency. Mining is an activity aimed at creating a cryptocurrency and/or validating cryptocurrency transactions between a buyer and seller.
However, cryptocurrencies also have potential benefits such as better record keeping and more efficient cross border payments. Several countries are trying to mitigate some of these risks through regulations.
The Bill defines cryptocurrency to include information, code or token which has a digital representation of value and is generated through cryptographic means, or otherwise.