Reserve Bank of India ranks crypto near the bottom of systemic risks despite harsh criticism

In its latest financial stability report published on Thursday, the Reserve Bank of India, or RBI, reiterated its skepticism of digital assets, writing: 

"We must be mindful of the emerging risks on the horizon. Cryptocurrencies are a clear danger. Anything that derives value based on make-believe, without any underlying, is just speculation under a sophisticated name."

The report alleged that decentralized cryptocurrencies "are designed to bypass the financial system and all its controls," including Anti-Money Laundering, Combatting Financial Terrorism, and Know Your Customer mechanisms. In a tone similar to the previous report, the RBI says that private currencies often result in instability over time and undermine sovereign control over the money supply. 

However, despite all the harsh words, cryptocurrencies, perhaps ironically, rank at the nadir of the RBI's risk agenda. Based on a systemic risk survey, factors such as global growth headwinds, rising commodity prices and geopolitical tensions were regarded as high-impact events that could threaten the integrity of the global financial system.

Related: RBI seemingly wants to ban cryptocurrencies, but not for the reasons you might think

On the other hand, digital asset risks were at the bottom of the risk-weighted scale, being tied to sovereign rating downgrades and just slightly above political uncertainty and the threat of terrorism. In part, the RBI attributes such risk limitations to the relatively tiny foothold digital assets have on the global scale as well as their lack of integration within traditional finance.

Cryptocurrencies currently account for anywhere between 0.4% to 1% of the world's estimated $469 trillion in total financial assets. RBI has traditionally been one of the most skeptical central banks on crypto adoption, claiming that central bank digital currencies could "kill" private crypto.