The Reserve Bank of India (RBI) stated that "turmoil in the crypto assets market" is one of "the major risks that can potentially undermine global financial stability," adding that "developing a framework for global regulation, including the possibility of prohibition, of unbacked crypto assets, stablecoins, and defi" is one of the G20's top priorities while India holds the presidency.
On cryptocurrency regulation, Indian Central Bank
The Reserve Bank of India (RBI), the country's central bank, on Thursday published its Financial Stability Report (FSR) for December. The 172-page research discusses decentralized finance, central bank digital currencies (CBDCs), and crypto assets (defi).
The RBI research notes that it can be difficult to regulate new business models and technological advancements once they have reached a systemic scale. "It is crucial for policymakers to create an appropriate policy strategy to support responsible innovation and to limit financial stability concerns in the crypto ecosystem," the Indian central bank stated.
"The development of a framework for global regulation, including the potential for the prohibition of unbacked crypto assets, stablecoins, and defi, is one of the top tasks under India's G20 leadership in this context."
The central bank noted that one of "the biggest dangers that can possibly threaten global financial stability" is "turmoil in the crypto assets market." The RBI also noted that crypto assets are extremely volatile, "show substantial correlations with equities," and have declined when inflation has risen.
The report also highlights the terra/luna meltdown in May and the bankruptcy filings of several major crypto firms, including crypto hedge fund Three Arrows Capital (3AC) and crypto lender Celsius Network. It also notes that the collapse of crypto exchange FTX and subsequent crypto market sell-offs "have highlighted the inherent vulnerabilities in the crypto ecosystem."
G20 Participants to Talk About Crypto Regulation
India's economic affairs secretary, Ajay Seth, stated earlier this month that the G20 countries wanted to create a global regulatory consensus on crypto assets. Nirmala Sitharaman, the finance minister for India, stated in October that the establishment of a technology-driven regulatory framework for crypto assets is something she hopes will happen while her country holds the G20 chair.
Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.K., the U.S., and the European Union are the countries that make up the Group of 20 (G20). The category accounts for over 85% of global GDP.
However, the central bank of India has consistently advocated for the outlawing of all cryptocurrencies not issued by the government, such as bitcoin and ether. Shaktikanta Das, governor of the RBI, issued a warning last week, stating that if cryptocurrencies are not outlawed, the next financial catastrophe will result. However, the finance minister of India stated in July that major international cooperation is necessary for effective regulation and prohibition of cryptocurrency.
