Former RBI Governor Wants Crypto to Find Proper Use Case to be “More Confident” About its Value

Raghuram Rajan, who is also the former IMF chief economist, expects US inflation to be transitory and said, “Ideally, the Fed would like to observe as long as possible,” with the problem being the Delta variant and others “lurking in the background.”


Raghuram Rajan, former Reserve Bank of India governor and chief economist for the IMF, says cryptocurrencies have a “potential future,” particularly the regulated stablecoins.

While optimistic about crypto assets’ future, Rajan told the Reuters Global Markets Forum that it isn’t clear what fundamentals were exactly backing their valuations other than “heady environment.” He attributed easy monetary policy as the driver behind rising prices in all asset classes.

Cryptos won't be “your last resort” in a doomsday scenario, Rajan further said only to add, “I would be much more confident about the value of these cryptos once they find proper use cases,” such as an effective means of payment, especially in cross-border transactions.

Besides crypto, he talked about the responsibility of promoting sustainable investments to lie with governments and not central banks.

Central banks should steer clear of politically-driven unlegislated areas such as “green” investments, which is primarily a fiscal matter, and should focus on the financial stability of these investments and other threats such as cyber security and cryptocurrencies, said Rajan.

Providing financial and monetary stability is already a pretty broad responsibility, he added.

He commented on the “taper tantrum,” which he did not expect the markets to react to in a 2013 style.

The market is awaiting insights from the Federal Reserve Chairman Jerome Powell on Friday at the Jackson Hole economic symposium. Central banks’ top officials often announce important shifts regarding the $120 billion monthly Treasury purchases in this forum.

“Ideally, the Fed would like to observe as long as possible, (and) … make sure that the economy is well on track towards growth.”

“Of course, the problem is the Delta variant, plus whatever variants are lurking in the background.”

Rajan, a professor of finance at the University of Chicago Booth School of Business, sees inflationary pressures in the US to be transitory but said prices might remain elevated for longer than expected due to solid wages, unavailability of workers, and additional fiscal constraints stimulus measures.

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