Reserve Bank of India Governor Sanjay Malhotra outlined the central bank's cautious position on cryptocurrencies at the Kautilya Economic Conclave in New Delhi on 3 October, citing questions around monetary-policy implications and what he described as the "singleness of money," while pointing to central bank digital currencies and broader payment innovations as tools that could help address gaps in cross-border transactions.
Malhotra noted that transactions within the country already move quickly, cost little, and pose no major inconvenience to users, leaving the settlement of payments across borders as the area where meaningful gaps remain. Addressing cross-border payments through mechanisms such as central banking institutions represents one viable path forward, he indicated.
At the same gathering, Jean-Claude Trichet, a former president of the European Central Bank, addressed the worldwide expansion of cryptocurrencies, expressing the view that insufficient oversight of the sector had placed strain on global financial systems.
Technology-linked financial exposures that Malhotra drew attention to extended well beyond the cryptocurrency space. Malhotra pointed to two potential pressure points for global asset prices — a deceleration in AI-related capital spending and earnings that fall short of forecasts — either of which, he indicated, could produce a pronounced pullback among equities tied to the technology, adding that sustained investment in artificial intelligence had been underpinning worldwide market performance.
A pullback in AI spending or profit performance, he noted, could set off a broad reassessment of asset valuations across companies tied to that technology sector. Any market correction in developed economies carries the potential to redirect the flow of international capital toward India.
Those price declines in Indian equity markets, while drawing valuations down from their earlier peaks over recent months, have unfolded without any notable disruption, he noted.
Malhotra pointed to cyber risk as the area he views as posing the most pressing near-term challenge tied to increasingly capable AI tools, separate from any concerns about financial-market valuations. Gaps in cyber defences at any single institution or nation ripple outward through a tightly woven financial network, carrying consequences well beyond the point where they first took hold.
Malhotra put forward the view that the next financial crisis might not necessarily originate inside a bank or even within the conventional financial system, adding that a geopolitical event, a cyberattack, or a technological failure could instead serve as the triggering point, with its effects rippling into the financial system through several distinct channels. Addressing that risk, he indicated, would require oversight bodies to develop a clearer picture of how institutions, technological systems, and the pathways along which financial strain travels are all linked together.
