Is India Moving Towards Banning Crypto Assets In Its G20 Presidency?

In a report that was released today, the Reserve Bank of India (RBI) stated that crypto assets are highly volatile and exhibit high correlations with the existing equity market. The similarities are such that, it contradicts the industry’s narrative and claims about virtual assets being an alternative source of value due to the inflation-hedging benefits that are supposedly associated with them.

Crypto Frameworks In Development

India announced on Thursday that during its current presidency of the G20, it would prioritize the development of a framework for global regulation of unbacked crypto assets, stablecoins, and decentralized finance (DeFI). Additionally, India stated that it would also explore the “possibility of prohibition,” which could be a significant setback for the industry as it continues to develop.

“To address potential financial stability risks and protect investors, it is important to arrive at a common approach to crypto assets”, the Financial Stability Report released by RBI said on Thursday.

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The RBI issued a warning echoing the sentiments of other central banks across the world, saying that crypto might “divert financing away from traditional finance” with a larger effect on the actual economy, if it becomes increasingly integrated into the mainstream financial system.

India To Ban Crypto?

In the context of developing a regulatory framework for cryptocurrencies, the report stated that various options were being considered internationally. One such way was to subject them to the same regulation applicable to traditional financial intermediaries and exchanges. However, they were also open to prohibiting the crypto market completely. The information gathered from the report stated that:

“Another option is to prohibit crypto assets, since their real life use cases are next to negligible and the challenge is that different countries have different legal systems and individual rights vis-à-vis state powers.”

One of the most outspoken critics of the cryptocurrency business is the Indian central bank. Last week, RBI Governor Shaktikanta Das issued a warning, stating that unless private cryptocurrencies are outlawed, the next financial crisis will be caused by their use.

Cryptocurrency, according to Das, has its roots in the notion that it subverts or undermines the current financial system. “They don’t believe in the central bank” or a controlled financial system, Das said. He further added that he believes the crypto market should be disallowed and said, “I’m yet to hear a good argument about what public purpose it serves.”

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