India's central bank describes cryptocurrencies as highly volatile assets that can be compared to equities.
The Reserve Bank of India (RBI), India's central bank and regulatory body responsible for regulating the Indian banking system, has called for a global crypto regulatory framework.
According to India's latest financial stability report, RBI hopes to use India’s G20 (Group of Twenty) presidency to start discussions on developing a global crypto regulatory framework.
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Under India’s G20 presidency, one of the priorities is to develop a framework for global regulation, including the possibility of prohibition of unbacked crypto assets, stablecoins and DeFi.
In the report, the Reserve Bank of India stated that cryptocurrencies are highly volatile assets. Nevertheless, RBI claims that cryptocurrencies can be compared to equities, which disputes the industry’s narrative that crypto holds an alternative source of value. Regarding the matter, in its report RBI stated:
Leverage is a constant theme running across the crypto ecosystem, making failures rapid and losses huge and sudden.
On top of that, RBI stated that governments across the world have to keep an eye on the crypto sector as it becomes increasingly more interconnected with mainstream finance and may “divert financing away from traditional finance with broader effect on the real economy.”
Nevertheless, the central bank stressed that cryptocurrencies are especially popular among the “younger segment of the population,” as the rising prices of crypto assets influence young adults to believe in fast money. The Reserve Bank of India concludes its crypto segment by stating:
To address potential future financial stability risks and to protect consumers and investors, it is important to arrive at a common approach to crypto assets.
Therefore, RBI proposed three ways how global leaders can regulate crypto. The first option is to handle crypto by “the same-risk-same-regulatory-outcome principle.”
The second suggestion raises the possibility of banning crypto assets, as according to the RBI, “their real-life use cases are next to negligible.”
Lastly, RBI offers to let the crypto ecosystem “implode” without taking any regulatory action.
It is worth noting that, at the end of November, RBI announced the launch of a central bank digital currency (CBDC) pilot for a wholesale segment.
