Former Reserve Bank of India (RBI) Governor Raghuram Rajan said on the sidelines of the World Economic Forum (WEF) annual meet in Davos that the collapse in the prices of digital assets over the past year will allow investors to focus on the “true value” of this new technology.

“The idea that somehow cryptos are going to maintain value, while the fiat currencies collapse. That’s nonsense,” he said. “Fiat currencies have won out in terms of which is more credible.”

The wider crypto market shrank by $1.4 trillion last year with the most popular crypto - bitcoin losing 60 percent of its value. However, the crypto market has clocked a 26 percent gain this month, leaping 22 percent in the past week alone.

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Cryptocurrencies took a credibility hit in November last year when crypto exchange FTX worth $32 billion valuation filed for bankruptcy protection in November and US prosecutors accused its founder Bankman-Fried of orchestrating an “epic fraud".

Rajan expects the US Federal Reserve to continue raising interest rates for now till the labour market recovers completely. “When you still have 200,000 jobs (being created) a month, it suggests that there’s still a way to go,” he said.

Rajan believes a mild recession wouldn’t pose a problem for the US central bank.

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-With inputs from Reuters