Only a handful of 6,000-odd existing cryptocurrencies will survive: Raghuram Rajan

Former Reserve Bank of India (RBI) governor Raghuram Rajan on Wednesday drew parallels between the current cryptocurrency mania and the tulip mania in Netherlands in the 17th century and said that out of the 6,000-odd cryptocurrencies in existence today, only a handful will survive.

In an interveiw with CNBC-TV18, Rajan said, "If things have value only because they will be pricier down the line, that’s a bubble." "…a lot of cryptos have value only because there is a greater fool out there willing to buy."

Also Read — Centre to tighten noose on pvt crypto in Winter Session

In the 17th century in Netherlands, prices for some bulbs of fashionable tulip reached extraordinarily high levels in 1634. However, the prices dramatically collapsed in 1637.

Rajan said that cryptos may pose the same problem as unregulated chit funds, which take money from people and go bust. "A lot of people holding crypto assets are going to be aggrieved," he said.

The former RBI governor added that it was not as if cryptocurrencies had no value at all, adding that some of them would survive to provide payments, especially cross border payments.

Rajan said that the problem was partly due to regulators not fully understanding this space and how to regulate it.

His remarks comes amid news that the Centre is planning to bring a bill to ban private cryptocurrency in the upcoming Winter Session of the Parliament.

Amid concerns over cryptocurrency, the government also intends to bring The Cryptocurrency and Regulation of Official Digital Currency Bill 2021, which is aimed at creating a "facilitative framework" for creation of the "official digital currency to be issued by the RBI".

"The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses," an official document said.

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