The Reserve Bank of India (RBI) says that one of the priorities of the G20 under India’s presidency is to “develop a framework for global regulation, including the possibility of a ban, of unbacked crypto assets, stablecoins and defi.“India’s central bank warned that “turbulence in the crypto asset market” are part of the “major risks that can potentially jeopardize global financial stability.“
India’s central bank on regulating crypto-currencies
India’s central bank, the Reserve Bank of India (RBI), released its Financial Stability Report (FSR) for December on Thursday. The 172-page report includes discussions on crypto-assets, central bank digital currencies (CBDCs) and decentralized finance (defi).
“Regulating new technologies and business models after they have developed to a systemic level is a challenge“, the RBI report states. “To promote responsible innovation and mitigate risks to financial stability in the crypto ecosystem, it is critical that policymakers design an appropriate policy approach.“The Indian central bank continues:
In this context, under India’s 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.
The central bank has designated the “turbulence in the crypto-asset market.” as one of the “major risks that can potentially jeopardize global financial stability.“The RBI also said that cryptoassets are highly volatile,”Have high correlations with stocks” and fell when inflation rose.
The report further notes that the collapse of the FTX crypto-currency exchange and subsequent sell-offs in the crypto-currency market “have highlighted the inherent vulnerabilities in the crypto-currency ecosystem.“It also highlights the collapse of terra/luna in May and the bankruptcy filings of several large crypto companies, including crypto hedge fund Three Arrows Capital (3AC) and crypto lender Celsius Network.
G20 members to discuss regulation of crypto-currencies
Ajay Seth, India’s economic affairs secretary, said earlier this month that G20 members aim to build a policy consensus on cryptoassets to improve global regulation. Indian Finance Minister Nirmala Sitharaman said in October that crypto-currencies would be part of India’s agenda during its G20 presidency, adding that she hoped a technology-driven regulatory framework for crypto-currencies would be established.
The members of the Group of 20 (G20) are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union. This group accounts for approximately 85% of global GDP.
India’s central bank, however, has repeatedly recommended banning all non-state-issued crypto-currencies, including bitcoin and ether. Last week, RBI Governor Shaktikanta Das warned that crypto-currencies would cause the next financial crisis if they were not banned. However, India’s finance minister said in July that both banning and regulating crypto-currencies can only be effective with significant international collaboration.