crypto: Central banks should regulate cryptos: DBS Bank CEO Piyush Gupta

Synopsis

Central banks across the world should look at bringing cryptocurrencies in the regulated space though non-fungible tokens (NFT) or stable coins will not replace fiat currency, says DBS Bank Group CEO Piyush Gupta during an interaction.

Gupta said that blockchain technology has the power to change the back office of the world.

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Mumbai: Central banks across the world should look at bringing cryptocurrencies in the regulated space though non-fungible tokens (NFT) or stable coins will not replace fiat currency, says DBS Bank Group CEO Piyush Gupta during an interaction.

Gupta, who was speaking at The Economic Times Global Business Summit, said that there is a better use case of wholesale cross-border central bank digital currencies (CBDC).

“I don’t think that crypto currencies will become money as we know it, but it can be an alternative to gold and its value,” Gupta said. “The other big challenge is volatility in value. If you want to use this to pay for something, you don’t know what it’s costing you. Today cryptos are a potential source of speculated value, it’s unlikely that this is a source of money as we know it.”
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Gupta said that central banks across the world should look at regulating cryptos.

“Regulating it out of the formal banking system is an unwise thing to do, as you wish to push it out into the unregulated space and then you have no way of creating any guard rails,” he said. “Nobody knows who owns private money, so it is subject to misuse, that is what the RBI governor is so concerned about, monetary systems across the world have flagged off AML and KYC issues pertaining to crypto.”

While speaking about specific use cases of a CBDC, Gupta also said that introduction of such currencies could lead to disintermediation in the banking system.

“CBDCs come with it’s own set of challenges, if you go direct, every citizen opens a direct account with the central bank and it disburses the CBDC directly,” he said. “The downside of this is it will disintermediate the existing banking system, therefore you make the process of credit creation the onus and responsibility of the central bank alone and they don’t want that.”

Gupta added that while monetary authorities across the world may sooner or later bring in this new form of fiat currency, a wholesale CBDC makes for a better use case.

“Digital money will come, some geographies will try retail CBDC but I feel there is a far greater use case of wholesale CBDCs especially cross-border,” he said.

Gupta also said that central banks and top institutions across the world should look at ways and means to harness the blockchain technology.

“At the root of crypto or CBDC is blockchain, which lets you establish trust without a hub in the middle,” he said. “Recognising that the technology has the power to change the notion of a hub and spoke model to a distributed model, that’s a very important concept.”

Gupta said that blockchain technology has the power to change the back office of the world.

“It can change how trade finance is processed, it can change how payments and settlements clearances work, it can change how exchanges work,” he said.

Commenting on the Russia-Ukraine war, Gupta said that while the world had benefited from the peace dividend of the last several years, a bifurcated world would be a huge loss. “The events of the last week have given me a reason to pause,” he said. “It worries me that if we get a bifurcated world like economic and technology blocks, it will make life a lot more challenging. We have all benefited from the peace dividend over the last 50-60 years and if we don’t have that, we will have to find a tricky way out.”

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Updated: 03/18/2022 — 00:00