Most existing cryptocurrencies won't survive, says Raghuram Rajan

For India, Raghuram Rajan said that the Centre must allow the underlying blockchain technology to flourish. (File image: Reuters)

Former Reserve Bank of India (RBI) governor Raghuram Rajan believes that out of the 6,000-odd cryptocurrencies in existence today, most will perish.

Only one or two, or at most a handful, would survive, Rajan said. “If things have value only because they will be pricier down the line, that’s a bubble,” he told CNBC-TV18. “…A lot of cryptos have value only because there is a greater fool out there willing to buy.”

Rajan compared the current fad in cryptocurrencies to the tulip mania in Netherlands of the 17th century. “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.

Also read | Top cryptocurrency news of the day: Major stories on legislation and more

It was not as if cryptocurrencies had no value at all, said Rajan, adding that most of them did not have permanent value. Also, some of them would survive to provide payments, especially cross-border payments, he said.

“In the US, crypto is a $2.5-trillion problem that nobody really wants to regulate,” he said.

For India, Rajan said, the Centre must allow the underlying blockchain technology to flourish. Blockchain ways of transacting were much cheaper, especially across borders, he said.

Also read | Cryptocurrency Prices Today: Bitcoin, Ethereum, Solana decline, market capital up 4.84%

The government is likely to table a Bill in the winter session of Parliament, scheduled to begin from November 29, to bar all but a few private cryptocurrencies and create a framework to regulate a digital currency issued by the RBI.

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is listed for introduction in the Lok Sabha for the winter session.

It seeks to “create a facilitative framework for the creation of the official digital currency” to be issued by the central bank. “It also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” reads the introduction to the Bill on the Lok Sabha website.