The governor of the central bank of India, Shaktikanta Das, a huge critic of cryptocurrencies, is scornful of the “underlying” value of cryptocurrencies, but at the same time he considers them a “big threat” to the stability of his country’s financial system.
Governor Das is another voice absolutely entrenched in the traditional financial system. Central bank governors, leaders of global financial organisations, and others in the system who feel threatened by the approaching tide of crypto, are queuing up to ridicule and slander these new digital assets.
Comparing crypto with tulips is the ultimate taunt, and the governor is fully conscious of the comparison that he is making. The Dutch tulip mania involved the buying and selling of tulips for ever more exorbitant prices, until a crash occurred in 1637. Of course, the tulips were actually relatively worthless, but at the time they were perceived as possessing great worth.
So in order to make a comparison between tulips and crypto, we have to explore Das’ use of the word “underlying”. When looking at tulips at the time it has to be acknowledged that there was no underlying value for tulips, other than that they were perceived to be valuable, and up until the crash, investors were prepared to invest in them based on this sole premise.
When we look at crypto as a whole Das’ comment can probably well apply to a lot of them. We know that inexperienced investors are drawn into the likes of meme coins and other cryptos that are just there for a money grab. They are riding the crypto wave.
However, when analysing the serious cryptocurrencies, their value can undoubtedly be seen. If you take Bitcoin, you see a fully decentralised network that can transfer value quickly and relatively cheaply.
The number one cryptocurrency is actually more of a store of value, rather like gold, except that it is scarcer, and far easier to move around. However, what gives it the majority of its power is that it is outside of the control of governments and banks, giving the owner complete control of their wealth and the ability to spend it exactly as they want, with no third party such as a bank telling them they can’t.
Even the taunts that bitcoin is used by money launderers and terrorists are frankly risible. Cryptocurrencies sit atop the blockchain, and this technology provides a traceable path for every transaction that was ever, or will ever be made, barring advances in privacy technology.
It must be acknowledged that governor Das does have an understandable concern. Cryptocurrencies not only threaten the monopoly of the banks, but they threaten his existence. The time is coming when banks will become completely obsolete.
They are lumbering behemoths, drowning in bureaucracy, that are only able to survive by charging exorbitant fees and by receiving cash injections by government if they look like they are failing.
Governor Das needs to realise that banks have lost the trust of the people. The Cyprus bail-in, or the scores of criminal cases brought against various banks in such areas as manipulating markets, fraudulence, and scams, are some of the many examples of bank criminality.
Governor Das would avail himself better if he actually studied the new and upcoming finance system. He might actually see areas where banks could compete by offering various crypto services to customers.
Less talk about tulips, and more serious study of the opposing view. Surely that is what could be expected of a leader in such a high position?
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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