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Former Reserve Bank of India Governor Raghuram Rajan said on Wednesday said that just a handful of the nearly 6,000 cryptocurrencies currently in existence were likely to survive, CNBC-TV18 reported.
Rajan’s comment came a day after it came to light that the Union government will introduce a Bill during the Winter Session of Parliament to ban private cryptocurrencies in India and introduce an official digital currency issued by the Reserve Bank of India.
“If things have value only because they will be pricier down the line, that’s a bubble,” the former RBI governor told CNBC-TV18 in an interview.
Rajan noted that people hold cryptocurrencies for two reasons – as an asset whose value might rise in the future, and for use in payments.
“Do we really need 6,000 cryptocurrencies to do payments?,” he questioned. “One or two, may be a handful, are going to survive to be used as payments even if the technology is so useful that it is a substitute for cash and currency.”
Rajan, however, urged the Union government to allow the blockchain technology used for cryptocurrencies to flourish, according to CNBC-TV18. He said that ways of conducting transactions using the technology were much cheaper, particularly across borders.
The Cryptocurrency and Regulation of Official Digital Currency Bill, slated to be introduced in the upcoming Winter Session of the Parliament will prohibit all private cryptocurrencies, but will allow some exceptions “to promote the underlying technology of cryptocurrency and its uses”.
After the government listed the Bill for introduction in the Parliament on Wednesday, cryptocurrencyvalues fell sharply in India, the Economic Times reported.
Bitcoin, Ethereum, Dogecoin and Polkadot fell by 17%, 14%, 20% and 14% respectively in rupee terms.
Experts have, however, advised not to panic due to listing of the Bill.
“The panic stems from two lines of text in the description of the Bill,” Ajeet Khurana, the founder of think tank Genezis Network told Mint. “If the bill indeed bans cryptocurrencies, it would be justified. But I don’t think it will do so, and panicking now would be a big mistake.”