The Indian government’s chief economic adviser has warned against innovations like crypto and decentralized finance (defi) without regulation. “We may not be fully aware or understand the kinds of forces we are unleashing ourselves,” he said.

Indian government’s chief economic adviser is skeptical about crypto, defi, decentralization

The Chief Economic Adviser to the Government of India (CEA), V. Anantha Nageswaran, reportedly warned about the danger of crypto and the risks posed by the lack of regulation at an event in Assocham on Thursday. Regarding cryptocurrency, he was quoted by local media as saying:

Also, the more decentralized they become and the lack of a minder or centralized regulator means there is a world of Caribbean pirates, or a world of “winner take all” in terms of being able to really take everything from someone else.

The government economic adviser stated that he agrees with Reserve Bank of India (RBI) Deputy Governor T. Rabi Sankar on crypto and decentralized finance (defi). The RBI official has warned that there appears to be more of a case of regulatory arbitrage involving crypto and Defi than real financial innovation right now.

Regarding defi, Nageswaran said:

While it qualifies as an innovation in my opinion, I would reserve my judgment as to whether it’s really innovative or really disruptive in a positive sense, or if it’s something we’ll regret.

Asked whether cryptocurrency could be an alternative to fiat currencies, the economic adviser emphasized that it has to “serve many purposes”. He elaborated, “It has to be a store of value, it has to have widespread adoption, and it has to be a unit of account… In all of these cases, the new ‘innovations’ like crypto or defi have yet to pass the test.”

Nages monitor closed:

So I wouldn’t be too keen on them because sometimes we may not be fully aware or comprehend of the kind of powers that we are unleashing on our own.

“I would be a little hesitant about welcoming some of these fintech-based disruptions like defi and crypto etc.,” he noted.

The Indian government is currently working on the country’s crypto policy. The Treasury has consulted with the International Monetary Fund (IMF) and the World Bank on crypto regulations. Last week, the Securities and Exchange Board of India (SEBI) said that the decentralized nature of crypto makes regulation a challenge.

Meanwhile, the Indian central bank remains skeptical about crypto. On Friday, RBI Governor Shaktikanta Das warned investors against trading cryptocurrencies, reiterating that they “pose huge risks to financial stability.”

What do you think of the statements made by the Indian government’s chief economic adviser? Let us know in the comment section below.

Kevin Helms

As an Austrian economics student, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the interface between economics and cryptography.

photo credit: Shutterstock, Pixabay, Wiki Commons, Michael Vi

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