On August 26, 2021, the former governor of the Reserve Bank Of India (RBI) — Raghuraman Rajan opined to Reuters. He said regarding “How Central banks should not mandate “green” investments.” In this report, we may infer certain interesting turns to his dialogues. Mr. Rajan emphasized how calculative regulation of stablecoins might store great potential. Cryptocurrencies may become the future of finance and they may become a means of payment.
Raghuram Rajan Thinks Cryptocurrencies Can Become Effective Way of Becoming Means of Payment
Raghuram Rajan expressed his beliefs in cryptocurrency and the potential it may hold provided they are well-regulated, “I would be much more confident about the value of these cryptos once they find proper use cases, such as an effective means of payment, especially in cross-border transactions.”
Mr. Rajan was the former chief economist for the International Monetary Fund (IMF). He emphasizes the need for regulations of stablecoins. Although, Raghuraman Rajan claims that he is not sure of how stablecoins has derived their valuation, “other than a ‘heady environment,’ with easy monetary policy fuelling all asset prices.”
What are stablecoins?
Stablecoins are a subset of cryptocurrencies and are held as valuable digital assets. The valuation of stablecoins is backed by fiat money, such as US Dollar or traded commodities like Gold. Due to the collateralization, stablecoins achieve a prie stability and aren’t massively speculative.
Cryptocurrency and Stablecoins Must be Regulated Responsibly to Get the Maximum Benefits From it
Raghuraman Rajan who is currently a professor of finance at the University of Chicago Booth School of Business commented that “Right now, in this heady environment with asset prices picking up, many cryptos are also being valued — not so much as a means of payments — but as assets in their own right.”
For the past few years, various countries are mulling over the legal framework required to responsibly regulate cryptocurrencies without hampering the prospect for digital financial developments.
“Cross border payments are one area which is wide open, because of the huge transaction costs of making cross-border payments,” opined Raghuraman Rajan. I don’t see why anyone who understands the blockchain system and cryptocurrency market would disagree. Take, for example, the Afghans putting all their savings as an investment in cryptocurrency and digital coins so that they can safeguard their money and carry them along with them. They are using their crypto wallets as safe for a global currency.
Including India, where the country’s population estimated to invest in cryptocurrency was a maximum of 4 to 5 million people in 2018-19. Now the numbers grew to 15 to 20 million with an invested market cap of $1.5 billion. Indian governmental authorities are working to regulate the cryptocurrency channel to prevent losing funds outside the border.
Raghuraman Rajan told Reuters that, “I think the value of cryptos has to be seen more in terms of are they going to be useful in the system going forward. Yes, some of them have value because they have value, and maybe that will persist. I’m not going to say that bitcoin is going to implode tomorrow. But I will say that I would be much more confident about the value of these cryptos once they find proper use cases, and the technology is evolving to make that happen.”
These comments come at a time when the cryptocurrency market is back with its high after three months of crashing market. Many countries have somewhat come to terms with cryptocurrency trading and proceeded to go with it, while a group of experts remains busy formulating a top-grade plan to prevent financial crimes from cryptocurrency as much as possible.
Raghuraman Rajan, a financial expert stated words that could provide a ray of optimism for crypto communities across the globe.