The Governor of the Reserve Bank of India, Shaktikanta Das, has reiterated his concerns about the risks associated with crypto currencies and the need for an international framework to address them. Das spoke at a meeting of finance ministers and central bank governors of G20 countries, stating that cryptocurrencies pose major risks to financial stability, monetary systems, cybersecurity, and overall financial stability.
Das emphasized the importance of developing an international framework to deal with the risks associated with cryptocurrencies. The International Monetary Fund and the Financial Stability Board are currently working on a synthesis paper that will form the basis for future discussions on the issue. However, multiple options are under consideration, and it is too early to predict what the eventual architecture will be.
Das acknowledged that every country is sovereign and will ultimately make its own decisions regarding cryptocurrencies. However, he suggested that countries would be expected to follow the agreed position of the G20.
Despite the rapid evolution of the crypto universe, there is currently no comprehensive global policy framework for crypto assets. Policymakers are calling for tighter regulation due to concerns over the greater interconnectedness between crypto assets and the traditional financial sector, as well as the complexity and volatility around crypto assets.
What is Cryptocurrency?
Cryptocurrency is a digital or virtual form of currency that uses encryption techniques to regulate the generation of units of currency and verify the transfer of funds. Cryptocurrencies operate independently of a central bank and use a decentralized system called a blockchain to record transactions and maintain the integrity of the currency. The most well-known cryptocurrency is Bitcoin, but there are now thousands of different cryptocurrencies in circulation, each with its own unique features and uses.
Cryptocurrency Risk in India
Like many other countries, India is facing risks associated with cryptocurrencies. The Reserve Bank of India (RBI) has expressed concerns about the potential impact of cryptocurrencies on financial stability, monetary systems, and cybersecurity. In 2018, the RBI issued a circular prohibiting banks and financial institutions from providing services to individuals or businesses dealing with cryptocurrencies. However, the Supreme Court of India overturned this circular in 2020, allowing cryptocurrency transactions to continue.
Despite this, the Indian government has proposed a bill that seeks to ban all private cryptocurrencies and create a framework for a digital rupee issued by the Reserve Bank of India. The bill proposes strict penalties for the use of cryptocurrencies, including imprisonment and fines. The bill is currently under consideration by the Indian parliament, and its final form and impact on the cryptocurrency industry in India are yet to be determined.