Cryptocurrencies yet to pass test of fiat currency, difficult to regulate says CEA V Anantha Nageswaran

Chief Economic Adviser V Anantha Nageswaran said on Thursday that cryptocurrencies have yet to pass the test to become fiat currency. At the same time, he also said that it would be difficult to regulate them, as per PTI reported.

Unlike fiat money, cryptocurrencies cannot satisfy basic requirements such as store value, widespread acceptability, and a unit of account, he further said.

Referring to decentralised finance (DeFI), he said: "In my opinion, while it is considered innovation, I would reserve my judgement whether it is truly innovative or truly disruptive in a positive sense or is it something that we will come to regret."

Nageswaran concurred with RBI Deputy Governor T Rabi Sankar, who stated that there appeared to be a case of regulatory arbitrage rather than actual financial innovation with reference to crypto currencies and decentralised finance at the moment, said PTI.

Cryptocurrencies, he argued, must "satisfy various purposes" as an alternative to fiat currency. It must function as a store of value, have universal acceptance, and serve as a unit of account... In all these cases the new 'innovations' such as crypto or DeFI are yet to pass the test, PTI said.

"So I wouldn't be very excited by them because sometimes we may not be fully aware or comprehend the kind of forces we are unleashing ourselves. So I would be somewhat guarded in my welcome of some of these FinTech based disruptions like DeFI and crypto etc," Nageswaran said at an Assocham event.

(With the inputs of PTI)