Chief Economic Adviser V Anantha Nageswaran on Thursday said cryptocurrencies are akin to "a world of Carribean pirates" in the absence of a centralised regulatory authority and is yet to pass the test of a fiat currency.
He further said that unlike fiat money, crypto currencies cannot satisfy basic requirements such as having store value, widespread acceptability and unit of account.
"The more decentralised they become and the absence of a watchdog or a centralised regulatory authority also means that there is a world of Carribean pirates or a world of 'winner take all' in terms of being able to really taking it all from somebody else," he noted.
Referring to decentralised finance (DeFI), he said: "In my opinion, while it is considered innovation, I would reserve my judgement whether it is truly innovative or truly disruptive in a positive sense or is it something that we will come to regret."
Mr Nageswaran said that he agreed with RBI Deputy Governor T Rabi Sankar who had been saying that as of now there appeared to be a case of regulatory arbitrage with regard to crypto currencies and decentralised finance rather than a case of true financial innovation.
As an alternative to fiat currencies, he said crypto currencies have "to satisfy many purposes. It has to be a store of value, it has to have widespread acceptability and it has to be a unit of account...In all these cases the new 'innovations' such as crypto or DeFI are yet to pass the test.
"So I wouldn't be very excited by them because sometimes we may not be fully aware or comprehend the kind of forces we are unleashing ourselves. So I would be somewhat guarded in my welcome of some of these FinTech based disruptions like DeFI and crypto etc," Mr Nageswaran said at an Assocham event.