Raghuram Rajan believes only a handful of cryptocurrencies will survive the hype — over 400 tokens have hit the dust in the last six months

• The former governor of the Reserve Bank of India (RBI), Raghuram Rajan, believes that only a handful of cryptocurrencies will survive the crypto hype.
• Over 400 coins have hit the dust since April, translating to a 20% increase in six months.
• Aritra Sarkhel, the Direct of Public Policy at the Indian crypto exchange WazirX, told Business Insider that it is a point of concern that there no laws on how and who can mint a new coin.

The former governor of India’s central bank, Raghuram Rajan, believes that only a handful of cryptocurrencies will survive in the long run. In an interview with CNBC, he compared cryptocurrencies to chit funds — in the sense that they take money from people before going bust, leaving a line of disappointed investors in their wake.


According to Coinospy, a website that tracks dead coins, over 2,000 coins have come and gone since the very first cryptocurrency, Bitcoin, was created in 2009. OneCoin and BitConnect, for instance, used money from new investors to pay returns to existing holders — much like the Sahara Group Chit Fund Scam, which is one of the biggest corporate scams in India’s history.

A more recent example is Squid Game token. In a ‘rug pull’ scam, the developers took the project offline once it hit a price of $2,861, making off with over $2.1 million.

In April, Coinospy reported that the number of coins to hit the dust had grown by over 35% as compared to the previous year with the tally at 1,949. Since then, that number has grown to 2,345 — a 20% increase in six months.

The lack of regulation leaves space for fraud

Experts have often talked about the need of balancing innovation versus regulation when it comes to crypto space. And, one of the main concerns is how to foster good use cases and filter out those that are fraudulent.

“There are no laws to keep anyone from making a new coin. In a way, that’s good because that’s how innovation spreads, but there has to be some law. All of this has investors money [at stake] — whether it’s a 20 year old investor putting in ₹1,000 or a massive hedge fund putting in millions,” Aritra Sarkhel the Direct of Public Policy at the Indian crypto exchange WazirX, told Business Insider during a discussion on regulation in India.


According to Rajan, blockchain technology itself is not the enemy. Despite the regulatory challenges, he believes that the Indian government should allow blockchain to flourish because it makes transactions cheaper, especially when it comes to cross border payments like remittances.

But, that doesn’t mean the government should turn a blind eye either. “What governments can insist on is getting information from crypto entities, when crypto entities get too big, the government can examine them more closely to ensure there isn’t fraud,” he told CNBC.

Indian amid forming its own laws to regulate cryptocurrencies

The Indian government is expected to discuss its own crypto regulations during the Winter Session of Parliament, which will kick off next week on November 29. No official draft of the proposed crypto bill has been shared with the public yet, however the agenda lists the crypto bill as one that will provide a framework for a central bank digital currency (CBDC) and ‘prohibit’ the use of ‘private’ cryptocurrencies subject to certain ‘exceptions’.


The vague wording of the bill’s introduction led to panic selling on Indian crypto exchanges leading to a cryptocurrencies trading at a discount in INR as compared to the US dollar. “While there are speculations that the government would impose a blanket ban on all private cryptocurrency, it doesn’t seem practical on account of various considerations,” explained L. Badri Narayanan, an executive partner at law firm Lakshmikumaran and Sridharan Attorneys.

According to him, a ban would not be technologically enforceable since blockchains need cryptocurrency to function. Moreover, those who want to trade or invest in cryptocurrencies would just find another way to do so and inevitably create a grey market.

“Bans only send folks underground. All technologies have pros and cons. We should work towards creating policies for managing the ills while reaping the benefits,” Dr.Sarabjot Singh Anand, the director of computer science and engineering at the BML Munjal University’s School of Engineering & Technology, told Business Insider.

The crypto bill had earlier been listed for discussion during the Budget Session of Parliament in February, however, it did not come to fore due to lack of time and the second wave of COVID-19. This time around those within the crypto community are hoping that won’t be the case with multiple closed-door discussions between stakeholders and the Ministry of Finance in the last 10 months.

“Parliamentarians are a lot more informed than they were in February or last year. You will likely see a debate, and a healthy one. Also, there are other bills and business listed in Parliament — and it all depends on how much time the government spends on other items, which are also important,” the CEO of the advocacy group IndiaTech — which has been advising the Indian government on crypto regulation — Rameesh Kailasam, told Business Insider.

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