India announced on Thursday that as the current president of the G20, it would prioritize the creation of a framework for international regulation of unbacked crypto assets, stablecoins, and decentralized finance. The country will also investigate the possibility of prohibiting these assets, which could be a significant setback for the emerging sector.
This month, India assumed the presidency of the G20, an organization comprised of 19 countries from various continents and the EU, which accounts for 85% of the global GDP.
The Reserve Bank of India (RBI), the country’s central bank, released a report stating that cryptocurrency assets are highly volatile and show strong correlations with stocks, contradicting the industry’s claims that virtual digital assets are an alternative source of value due to their implied benefits for hedging inflation.
The RBI also issued a warning, stating that if cryptocurrency becomes more integrated into the mainstream financial system, funding may be diverted away from traditional banking, which could have a greater impact on the economy.
The report noted that several solutions are being considered globally when creating a regulatory framework for cryptocurrency, including holding them accountable to the same regulations that govern conventional financial intermediaries and exchanges. However, the possibility of entirely banning the cryptocurrency market is also being considered.
According to the report: “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.”
The Indian central bank has been one of the most vocal critics of the cryptocurrency sector. Shaktikanta Das, governor of the RBI, warned earlier last week that unless private cryptocurrencies are outlawed, the next financial crisis will result from their use. Das stated that cryptocurrencies pose a serious threat to the nation’s macroeconomic stability.
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