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24/06/2019
Technology

Cryptocurrencies Don’t Pose Threats to Global Financial Stability: Reserve Bank of India

The Reserve Bank of India (RBI), India’s central bank, has said in a report that cryptocurrencies such as Bitcoin and other digital assets do not pose any threat to global financial stability. These comments are a part of the document published by RBI on the Trends and progress of Banking system in India in 2017⎯18. The document included an initial assessment report from the Financial Stability Board (FSB) that said that there is no immediate risk to the global financial stability from the various crypto assets. The FSB has made these comments after reviewing the financial stability risks posed by the rapid expansion of crypto industry.

Observations from the Financial Stability Board

So that you know, the FSB is a global body that monitors the global financial system and makes the recommendation to improve its health from time to time. It is a successor to Financial Stability Forum and has been established in April 2009 after G20 London Summit. The FSB has been reviewing the implications of rapid Crypto growth on the financial stability of the Global system. FSB also mentioned in the report that the current assessment of no risk posed by crypto assets would change in case cryptocurrencies became the preferred medium of transactions around the globe. The report also apprehended that interconnection of the crypto assets to the core of the global financial system could also change their viewpoint on the current assessment. The report further elaborated that cryptocurrencies require constant monitoring to review their implications for the global financial system stability, especially in the context of rapidly evolving market situations and ever-expanding user base of the crypto.

Crypto Industry in India

Cryptocurrency is not banned legally in India, but it has been under tight scrutiny even as the country is yet to finalize a regulatory framework for the digital coins. The RBI has already barred commercial banks from providing services to individuals or organizations dealing in cryptocurrencies on July 6 last year. This has negatively impacted the whole crypto ecosystem in the country as most of the developers, traders, service providers, and companies dealing in crypto assets are considering the option to migrate to the countries where the policies are more crypto friendly. The news suggests that in April last year, RBI was considering to launch its own digital currency named “Laxmi” but later on it shelved the plan suggesting that it’s too early for the bank to take a plunge into cryptocurrency. Meanwhile, there were also some reports suggesting that the Financial Stability and Development Council of India was considering banning any use of private cryptocurrencies in the nation. On the front of the blockchain, however, the council had other plans as it wanted to encourage its adoption in the country.

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