Cryptocurrencies have a bright future and could become useful payment methods: Rajan
Cryptocurrencies have a future, and despite their volatile valuations, these digital assets may find a way to become an effective means of payment, according to Raghuram Rajan, former governor of the Reserve Bank of India, speaking at the Reuters Global Markets Forum.
Stablecoins that are well-regulated, according to the former head economist of the International Monetary Fund (IMF). At the same time, he urged for stablecoins to be regulated as soon as possible.
A stablecoin is a digital currency that is tied to an underlying asset like the US dollar or a precious metal like gold.
Rajan, according to the Reuters article, was unclear on the fundamentals that were driving cryptocurrency valuations.
“Right now, in this heady climate with asset prices really heating up, many cryptos are also being regarded as assets in their own right," Rajan, a finance professor at the University of Chicago Booth School of Business, told Reuters.
Cryptocurrency exchanges in India are lobbying the government to classify cryptocurrencies as digital assets rather than cash. According to industry analysts, this will assist the government in addressing all of its valid worries about the financial risks involved with cryptocurrency.
Meanwhile, Nirmala Sitharaman, the finance minister, indicated that legislation regulating cryptocurrency is awaiting Cabinet clearance.
In an interview with Reuters, Rajan stated that despite their fluctuating values, some cryptocurrencies may find a way to become an effective mode of payment.
"Because of the high processing costs of conducting cross-border payments, cross-border payments are one sector that is wide open," he said.
The crypto business in India has risen from four to five million investors in 2018 to 15-20 million investors presently, with more than $1.5 billion invested. This has been fueled in part by the phenomenal profits that cryptocurrencies like bitcoin, ether, and dogecoin have provided over the last three years.
For cryptocurrency values to continue to rise, Rajan feels that these digital assets will need to find a solid use case.
"I believe that the worth of cryptos should be viewed in terms of whether or not they will be beneficial in the system in the future. Yes, some of them are valuable because they are valuable, and this may continue. I'm not going to predict that bitcoin will crash tomorrow. "However, I would be far more confident in the value of these cryptos once they find appropriate use cases, and the technology is growing to enable that," he said.