India’s Chief Economic Adviser Cautions on the Dangers of Crypto and Unregulated DeFi

June 12, 2022

Reading Time: 2 minutes

While the global world is embracing innovations such as cryptocurrency and decentralized finance (DeFi), India’s chief economic advisor (CEA) sees them as a cause for concern.

According to V. Anantha Nageswaran, crypto and DeFi are a kind of forces we are unleashing on ourselves without full comprehension of what they can do. Speaking at an Assocham event, the Indian top economic advisor stated that unregulated cryptocurrency and DeFi are posing a lot of risks.

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Crypto and DeFi is Like a World of Caribbean Pirate

India’s CEA Nageswaran likened the increased decentralization of crypto and DeFi to a world of Caribbean pirates or a “winner takes all” world. The Indian top economic adviser opined that the lack of a central oversight or regulatory authority makes crypto and DeFi an industry where one person can take everything else from someone else.

Nageswaran expressed he agrees with the Deputy Governor of the Reserve Bank of India T. Rabi Sankar. Sankar had previously warned of an increase in regulatory arbitrage in crypto and DeFi instead of real economic technology.

The idea of cryptocurrency eventually replacing fiat money has been in existence since the onset of digital coins. On this matter, India’s chief economic adviser stated that there are several functions that crypto needs to please.

The functions are that crypto needs to be a shop of worth, an extensive reputation, and a system of accounts. However, according to India’s CEA Nageswaran, crypto, and DeFi are yet to fulfill all these conditions.

Regulating Decentralized Crypto is Challenging

Currently, India is working on an internal crypto policy in consultation with the International Monetary Fund and the World Bank regarding crypto regulations. The process seems not to be as easy. The Securities Exchange Board of India (SEBI) mentioned regulation is challenging considering the decentralized nature of cryptocurrencies.

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