Cryptocurrency Induced Systemic Risk

The Turkish lira is sharply down in value this year, over 40%. On 24 November bitcoin hit a new all-time high after the lira dropped 15% on the news of President Erdogan defending the reduction in interest rates in Turkey at a time of 20% inflation.

In Venezuela bitcoins can be used to pay for fast food, in department stores and at the airport as a reaction to the country’s hyperinflation.

On 23 November India revealed plans to ban cryptocurrencies, resulting in bitcoin’s price falling 14.8% on the major Indian exchange WazirX. Bitcoin’s price fell worldwide but not as much as in India.

The Reserve Bank of India (RBI) forced banks not to do business with crypto firms for several years until the Supreme Court overturned that policy in March 2020. The RBI continues to regard cryptocurrencies as being bad for macroeconomic and financial stability, hence reintroducing a bill to outlaw private cryptocurrencies while creating a legal framework for a CBDC.