Chief Economic Adviser V Anantha Nageswaran said on Thursday that cryptocurrencies in the absence of a centralized regulatory authority are akin to “the Caribbean pirates’ world” and have yet to pass the test of a fiat currency.
He further added that unlike fiat money, cryptocurrencies cannot meet basic requirements such as store value, wide acceptability and unit of account.
“The more they become decentralized and the absence of a watchdog or a centralized regulatory authority also means that the Caribbean is a world of pirates or a world of ‘winners take all’ who can really take it all from someone else.” is,” he mentioned.
Referring to decentralized finance (DeFi), he said: “In my opinion, while it is considered innovation, I will reserve my judgment whether it is really innovative or really disruptive in a positive sense or is it something that Which we will regret.”
Mr Nageswaran said he agreed with RBI Deputy Governor T Rabi Shankar, who was saying that regulatory arbitration with respect to cryptocurrencies and decentralized finance now appears to be a matter of rather than a matter of genuine financial innovation.
As an alternative to fiat currencies, he said that cryptocurrencies “have to serve a number of purposes. It must be a store of value, it must have wide acceptance and it must be a unit of account… Or a new ‘innovation’ like the DFI is yet to pass the test.
“So I don’t get too excited by them because sometimes we are not fully aware or understand what kind of forces we are freeing ourselves from. That’s why I like some of these fintech based disruptors like DeFi. And the reception of crypto will be protected to some extent, etc.,” Mr. Nageswaran said at an ASSOCHAM event.