The Reserve Bank of India (RBI) is making concerted efforts at the global level to devise a common means of regulating or prohibiting unbanked crypto assets, DeFi tokens, and stablecoins, details from the recently unveiled Financial Stability report show.
RBI suggestions on crypto regulations
The RBI highlighted three ways of possibly regulating cryptocurrencies. As their first means, the central bank is considering prohibiting crypto through different regulatory oversight mechanisms that will dampen all its “real-world use cases.”
The central bank is also suggesting a framework on how countries can adopt a uniform risk management and regulatory approach that will subject all crypto exchanges to the same level of scrutiny as traditional financial intermediaries and registered bourses.
As their last option, the RBI mentions crypto’s inherent instability and riskiness that will ultimately prevent it from expanding. Accordingly, they may leave the sector to “implode” and become systematically irrelevant.
Although RBI maintains a negative view of the sphere, they are also worried about the potential risks should there be rapid integration of crypto into traditional finance and the broader effects it can have on the real economy.
RBI Governor Shaktikanta Das said crypto could ignite a global financial crisis if its usage is not controlled. Specifically, Das is concerned about the architecture of crypto that’s explicitly designed to bypass existing financial systems. Its proponents, he adds, don’t believe in centralized monetary authority or regulation from government entities.
India’s position on crypto
India started taxing virtual currencies earlier this year, imposing a 30% capital gain tax and a 1% transaction fee for any crypto transaction.
The crypto winter and the stringent disposition of the Indian governments to crypto have impacted liquidity in local exchanges like CoinDCX, Kuber, CoinS witch, and many others.
On Dec. 20, the Indian government, through its finance minister Pankaj Chaudhary, updated and clarified the parliament on the crypto bill and exchange probes. Pankaj disclosed that rampnt usage of cryptocurrencies necessitate global cooperation to prevent regulatory arbitrage due crypto’s borderless nature.
He notes that any legislation on the subject can only be effective with substantial international collaboration on risk and benefit assessment and the development of common taxonomies and standards.
Binance CEO Changpeng “CZ” Zhao, in an interview, described India as a “crypto unfriendly country.” He said the exchange had expressed concerns, especially about India’s crypto taxation policies. Nonetheless, the CEO remained cautious, saying tax guidelines take time to refine.
Early this month, India took up the G20 presidency for a year. The G20 comprises 19 countries from different continents and the EU, which accounts for 85% of the global gross domestic product (GDP).