• The Reserve Bank of India (RBI) released its Financial Stability Report (FSR) for December, which includes discussions on crypto assets, central bank digital currencies (CBDCs), and decentralized finance (defi).
• One of the priorities for the G20 under India’s presidency is to develop a framework for global regulation, including the possibility of prohibition, of unbacked crypto assets, stablecoins, and defi.
• The RBI warned that „turmoil in crypto assets market“ is among „the major risks that can potentially undermine global financial stability.“
The Reserve Bank of India (RBI), India’s central bank, released its Financial Stability Report (FSR) for December on Thursday, which focused on the developments and potential risks in the crypto asset market. The report discussed the current state of crypto assets, central bank digital currencies (CBDCs), and decentralized finance (defi).
The RBI said that one of the priorities for the G20 under India’s presidency is to develop a framework for global regulation, including the possibility of prohibition, of unbacked crypto assets, stablecoins, and defi. The Indian central bank noted that „turmoil in crypto assets market“ is among „the major risks that can potentially undermine global financial stability.“
The report highlighted the inherent vulnerabilities in the crypto ecosystem, noting that the collapse of crypto exchange FTX and subsequent crypto market sell-offs have highlighted the risks. It also noted that crypto assets are highly volatile, „exhibit high correlations with equities,“ and have fallen as inflation rose. The RBI also discussed the potential benefits of cryptocurrency, such as faster and cheaper payments, and the potential for financial inclusion for the unbanked population.
The RBI pointed to the need for an appropriate policy approach to promote responsible innovation and to mitigate financial stability risks. It emphasized the importance of developing a regulatory framework for crypto assets that are in line with international standards. The report also noted that the industry should be allowed to grow in a responsible manner, with the necessary safeguards in place.
The RBI concluded that the development of global crypto regulation is a priority for the G20 under India’s presidency. This would include the possibility of prohibition of unbacked crypto assets, stablecoins, and defi. It stated that it is important to ensure that the regulations are appropriate and proportionate, and that they are implemented in a timely manner.