Details from the recently released Financial Stability report reveal that the Reserve Bank of India (RBI) is making concerted efforts at the global level to develop a standard method of regulating or restricting unbanked crypto assets, DeFi tokens, and stablecoins.
RBI’s recommendations for cryptocurrency regulation
The RBI listed three potential regulations for cryptocurrency. The central bank is initially considering outlawing cryptocurrency through various regulatory supervision measures that will limit all of its “real-world use cases.”
The central bank is also making recommendations for a framework that countries can use to implement a unified risk management and regulatory framework that will subject all cryptocurrency exchanges to the same level of regulation and oversight as registered bourses and conventional financial intermediaries.
The RBI’s final suggestion is that cryptocurrency’s inherent volatility and riskiness will eventually stop it from expanding. As a result, they can leave the industry, “implode,” and gradually lose relevance.
Although RBI continues to have an unfavourable opinion of the industry, they are also concerned about the hazards that could arise from a rapid integration of cryptocurrency into traditional finance as well as the wider implications for the real economy.
Shaktikanta Das, governor of the RBI, warned that if cryptocurrency use is not controlled, it could trigger a global financial crisis. Das is particularly worried about the architecture of cryptocurrencies, which is specifically made to bypass current financial systems. He continues by saying that those who support it oppose the concept of centralized financial control or governmental supervision.
India’s position on the issue of cryptocurrency
India began taxing virtual currencies early this year, charging a 1% transaction fee and a 30% capital gain tax on all cryptocurrency transactions.
The Indian government updated and clarified the parliament on the cryptocurrency law and exchange probes on Dec. 20 through its finance minister, Pankaj Chaudhary. Due to the global nature of cryptocurrencies, Pankaj pointed out that increased usage of them demands international coordination to prevent regulatory arbitrage.
He points out that any relevant law can indeed be effective with intensive international cooperation on risk and benefit analysis as well as the creation of common taxonomies and standards.
In an interview, Changpeng “CZ” Zhao, the CEO of Binance, referred to India as a “crypto-unfriendly country.” He stated that the exchange had expressed concerns, particularly with regard to India’s cryptocurrency taxation policies. The CEO expressed caution, saying that it takes time to fine-tune tax regulations.
India acquired the G20 presidency for a year at the beginning of the month. The EU, which contributes 85% of the world’s gross domestic product (GDP), is one of the G20’s 19 member nations.