T Rabi Sankar: Cryptocurrencies – an assessment

Keynote address by Mr T Rabi Sankar, Deputy Governor of the Reserve Bank of India, at the Indian Banks Association 17th Annual Banking Technology Conference and Awards, virtual, 14 February 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Shri Goel, Chairman IBA, Shri Mehta, Chief Executive IBA, Prof Phatak, Chairman of Awards Jury, members of the Jury, MDs and CEOs and other senior functionaries of banks, ladies and gentlemen

Let me begin by congratulating the winners of the IBA Banking Technology Awards. It is indeed a privilege to be among so august an audience and so learned a gathering and be able to talk about an issue of momentous significance – how to deal with cryptocurrencies. Crypto technology and Web 3.0 is dominating the mind-space not just among the technology community but the financial industry as well. Cryptocurrencies, as per their proponents, have the potential to play a critical role in how finance pans out in the future; indeed, there is open speculation about whether finance as we know it and banking as we know it can survive the rise of cryptocurrencies. In this talk I will try and give you my assessment of cryptocurrencies and what they mean for our financial system.

Introduction

2. As many of you would already know, cryptocurrencies and other crypto products (like non-fungible tokens or NFTs) are being hailed as the innovations that would usher in decentralized finance or DeFi, which are blockchain applications geared to disrupt the traditional financial system. The basic purpose of blockchain, or more generally the distributed ledger, the technology on which these crypto-products run, is to make financial intermediation, and therefore banks, redundant.