Cryptocurrencies have no intrinsic cashflows to them and the latest collapse of the crypto exchange FTX exposes the vulnerabilities in such investments, the Economic Survey document for 2022- 23 tabled on Tuesday said. “The recent collapse of the crypto exchange FTX and the ensuing sell-off in the crypto markets have placed a spotlight on the vulnerabilities in the crypto ecosystem,” the survey said. It added crypto assets are “self-referential instruments” and do not strictly pass the test of being a financial asset because it has no intrinsic cashflows. The survey also cited how US regulators have disqualified Bitcoin, Ether and various other crypto assets as securities. Earlier, at an event in December 2022, the Reserve Bank of India Governor Shaktikanta Das had said cryptocurrencies should be “prohibited” and that if they are allowed to grow, the “next financial crisis” will come from private cryptocurrencies. He had noted cryptocurrencies have absolutely no underlying and it is a speculative activity. “I still hold the view that it should be prohibited. Countries have been taking different views, but our view is that it should be prohibited. If you try to regulate it and allow it to grow, please mark my words, the next financial crisis will come from private cryptocurrencies,” Das had said. The Indian government does not register crypto exchanges and it maintains crypto assets, by definition, are borderless and require “international collaboration” to prevent regulatory arbitrage. The government believes any legislation for regulation or for banning can be effective only with significant international collaboration on evaluating the risks and benefits and evolution of common taxonomy and standards.
