The Reserve Bank of India (RBI) has appealed to the country’s presidency in the G20 group of the world’s largest economies as a pulpit to call for the development of a global regulatory framework for crypto assets. In its most recent financial stability report, released on Dec. 29, the bank once again raised concerns about the burgeoning cryptocurrency ecosystem, suggesting that parts of it could be banned.
The report was generally optimistic about current conditions in the country, despite “strong global headwinds”, saying that “the Indian economy and domestic financial system remain resilient.” However, the tone changed dramatically in his analysis of cryptocurrencies, highlighting a familiar list of crises that hit the cryptoverse in 2022. He pointed to the volatility of cryptocurrencies, their high correlation to the stock market and their inadequacy as an inflation hedge, as well as governance issues, adding:
“Leverage is a constant that runs through the cryptocurrency ecosystem, making failures quick and losses huge and sudden.”
Be that as it may, the rise in prices in that ecosystem drives the popularity of cryptocurrencies, especially among the “younger segment of the population.” the report concludes:
“To address potential future risks to financial stability and protect consumers and investors, it is important to come to a common approach for crypto assets.”
The report contemplated three options for the regulation of cryptocurrencies. The first was “principle same-risk-same-regulation-outcome.” Second, he suggested the possibility of a ban on crypto assets “since their real-life use cases are almost negligible.” This option would be complicated by “different legal systems and individual rights front to the powers of the state” globally. A third option, “let it implode” without regulatory action, was deemed too risky for conventional finance. The report noted that:
“Under the Indian G20 presidency, one of the priorities is to develop a framework for global regulation, including the possibility of a ban, of unbacked crypto assets, stablecoins and DeFi.”
Crypto regulation was a G20 priority for India from the beginning of his presidency. Despite the government’s generally negative position on cryptocurrencies, there are an estimated 115 million users in India. The Reserve Bank of India is more of a supporter of a central bank digital currency. India also has one of the largest workforces in the world working in the Web 3.0 industry.
As the meetings of the first month of #G20India conclude, here’s a summary of the priorities of Finance Track: @FinMinIndia @RBI pic.twitter.com/a9IyY41tW6
— G20 India (@g20org) December 22, 2022
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