The Reserve Bank of India (RBI) has appealed to the country’s presidency of 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 latest financial stability report, released Dec. 29, the bank again expressed its concerns about the burgeoning crypto ecosystem and suggested parts of it could be banned.
The report was generally upbeat about current conditions in the country, despite “strong global headwinds,” saying, “the Indian economy and domestic financial system remain resilient.” The tone changed drastically in its discussion of crypto, however, as it highlighted a familiar laundry list of crises that struck the cryptoverse in 2022. It noted crypto’s volatility, high correlation with equities and its inadequacy as a hedge against inflation, as well as issues with governance, and added:
“Leverage is a constant theme running across the crypto ecosystem, making failures rapid and losses huge and sudden.”
Be that as it may, rising prices in that ecosystem drive crypto’s popularity, especially in the “younger segment of the population.” The report concluded:
“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.”
The report saw three options for crypto regulation. The first was “the same-risk-same-regulatory-outcome principle.” Second, it suggested the possibility of a prohibition of crypto assets “since their real-life use cases are next to negligible.” This option would be complicated by “different legal systems and individual rights vis-à-vis state powers” globally. A third option, “let it implode” without regulatory action, was considered too risky for mainstream finance to pursue. The report noted that:
“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.”
Crypto regulation was a G20 priority for India from the beginning of its presidency. Despite the government’s generally negative position on cryptocurrency, there are an estimated 115 million users in India. The RBI is more bullish on central bank digital currency. India also has one of the world’s largest Web 3 workforces.
— G20 India (@g20org) December 22, 2022