Economist Raghuram Rajan Questions 'True Value' of Crypto Technology
TL;DR Economist Raghuram Rajan recently spoke at the World Economic Forum’s annual meeting in Davos, Switzerland. He stated that fiat currencies have won out over cryptos in terms of credibility and that the idea that cryptos will maintain value while fiat collapses is “nonsense.” The Bank of International Settlements has also suggested policy actions to tackle crypto risks, including issuing central bank digital currencies to encourage sound innovation.
Economist Raghuram Rajan brought up the crypto collapse at the World Economic Forum’s annual meeting in Davos, Switzerland.
The former Reserve Bank of India (RBI) governor, as quoted by Reuters, said that the decline in the value of digital assets over the past year brings focus to the “true value” of the technology.
Rajan Says Fiat More Credible
“Fiat currencies have won out in terms of which is more credible,” he said in Davos.
…former RBI Governor Raghuram Rajan said on Wednesday. "The idea that somehow cryptos are going to maintain value, while the fiat currencies collapse.
That's nonsense," Rajan said on the sidelines of the World Economic Forum's annual meeting in Davos, Switzerland. — Gurbaksh Singh Chahal (@gchahal) January 18, 2023
“The idea that somehow cryptos are going to maintain value, while the fiat currencies collapse. That’s nonsense,” said Rajan.
BIS Recommends Crypto Policy Action
In 2022, the Three Arrows Capital (3AC) debacle and FTX implosion were two significant blows to the global cryptocurrency market cap. While the crypto market has recovered in the past week, it remains at a cumulative value of $1 trillion. That’s 50% of the capitalization reached in 2021.
Last year’s second most striking development was undoubtedly the alarming increase in DeFi hacks.
Former BIS vice-chairman Rajan has already said that not all cryptocurrencies will succeed in the long run. While steering clear of private crypto, the Bank for International Settlements, a global financial organization, has been utilizing the technology in the meantime.
BIS officials have stated in the past that central banks should advance the creation of centrally-backed CBDCs. Recently, the bank of central banks suggested policy actions to tackle crypto risks.
The recent crypto market turmoil highlights the urgency of tackling the risks. There are different lines of policy action, including issuing central bank digital currencies to encourage sound innovation. #BISBulletin #Crypto #CBDC #Regulation https://t.co/DnI4GXi35X pic.twitter.com/qVDPSWBBwC — Bank for International Settlements (@BIS_org) January 12, 2023
The BIS suggested in a Jan. 12 release, “Authorities may consider different – not mutually exclusive – lines of action to tackle the risks in crypto.”
Containment, regulation, or a complete ban were the options suggested by the institution. The organization has also warned in the past that a dispersed blockchain ecosystem may prevent the promise of a payments infrastructure from being realized.