CEA Anantha Nageswaran calls for cost benefit analysis of cryptocurrencies. Here’s what he said
CEA Anantha Nageswaran stressed the need to differentiate regulations between financial and non-financial sectors to avoid excessive risk and instability.
V Anantha Nageswaran, the Finance Ministry's Chief Economic Advisor (CEA) today had some suggestions for regulators about support for innovation, including cryptocurrencies and online gaming.
"In a country with low per capita income and financial illiteracy, not every innovation needs to be encouraged without any questioning. You have to have a social cost-benefit analysis of innovations such as Crypto and online gaming," said Nageswaran while speaking to ANI.
Nageswaran's comments on the crypto sector are particularly interesting because the largest token Bitcoin, recently broke the $100,000 ceiling. In terms of countries that have embraced, cryptocurrencies or Bitcoin, El Salvador saw its reserves cross the $600 million mark, while Vancouver city in Canada is mulling allowing cryptocurrencies for payments and taxes.
It remains to be seen if India or other major economies follow suit.
On Accountability & Transparency
Nageswaran was also cautioned regulators to be accountable about their “unelected power”.
“Regulators need to be cautious of their unelected powers, they need to be accountable. Transparency needs to be there with information sharing by Regulators,” he said.
On Need For Differentiation in Financial, Non-Financial Regulations
Nageswaran also said there is a need to differentiate between financial and non-financial sector related regulations so as to mitigate the excessive risk and instability that competition brings, according to a PTI report.
“We do need to make a distinction between regulation with respect to financial sector and regulation with respect to non-financial sector of the economy,” Nageswaran said.
He added that in the non-financial sector, except in case of natural utilities where one needs a regulator to protect customer interest, competition or market forces will take care of what the regulators do. But, in the financial sector, regulators have the tendency to lean towards excessive regulations, because if “things go wrong” the state is expected to provide bail out and the effects are systemic.
“In financial sector, competition sometimes leads to excessive risk taking and competition can be a source of instability rather than stability, which is not the case for non-financial sector of the economy. And the manifestation or climaxing of that was the 2008 global financial crisis,” Nageswaran added.
(With inputs from PTI)
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Business NewsEconomyCEA Anantha Nageswaran calls for cost benefit analysis of cryptocurrencies. Here’s what he said
First Published:11 Dec 2024, 02:46 PM IST
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