Cryptocurrencies pose risks to financial stability in India: Reserve Bank of India (RBI)

Cryptocurrencies, including stablecoins, pose significant risks to financial stability, according to the Reserve Bank of India.

Repetition of what has been long overdue Anti-crypto stanceThe Reserve Bank of India highlighted the various risks involved in digital assets in its report issued on December 30 Financial stability report For the year 2024.

While grassroots adoption of cryptocurrencies has boomed in India this year, the Reserve Bank of India has raised a red flag, warning that unsupervised use of digital assets, including stablecoins, could loosen monetary constraints and open backdoors for capital flight. It “transfers available resources to finance the national economy.” The real economy.”

According to the regulator, while the cryptocurrency market in India is “still small”, the narrowing of the gap between decentralized and traditional finance could pose systemic risks, with stablecoins carrying the additional risk of Potential operating risks.

Citing the IMF-Financial Stability Board report, the Reserve Bank of India (RBI) added that stablecoin issuers have become significant holders of key financial assets, such as government securities and other collateral, raising concerns about their impact on economic stability.

Stablecoins also pose unique challenges, particularly in emerging markets where “country-specific macroeconomic and demographic factors” have led to increased usage, the report said, adding:

“These developments could undermine the effectiveness of monetary policy, circumvent capital controls, stress financial resources, and threaten financial stability.”

Over the years, India’s central bank has kept up its pressure Central bank digital currencies As a more reliable alternative to stablecoins. During the 39th Annual International Banking Symposium of the G30 in October, Reserve Bank of India Governor Shaktikanta Das said Named Stablecoins are viewed as private money, which could undermine government sovereignty by allowing private issuers to dominate the payments market.

Coding It is another area of ​​interest to the RBI given the sector’s potential to “deepen the interconnection between the traditional financial system and the decentralized financial system.”

Although the tokenization market is still in its early stages, the Reserve Bank of India is concerned about the risks it could introduce, including “liquidity and maturity mismatches,” excessive borrowing or debt built on tokenized assets, and “asset price risks.” “Quality” and “Operation”. Fragility.

The report stressed that these vulnerabilities could spill over into the broader financial system, amplifying systemic risks.

The Reserve Bank of India (RBI) warning comes as India’s cryptocurrency sector continues to drift into regulatory limbo. Although Calls For clarity of order, Govt Recently admitted There is no “fixed timetable” for introducing a comprehensive regulatory framework for virtual assets.

Meanwhile, the cryptocurrency market in India remains burdened by a tax regime seen as draconian, with a 30% capital gains tax, a 1% lump-sum tax on each transaction, and no provision to offset losses.

According to a hadith a reportThis leads to capital flight, resulting in significant revenue losses for both the government in the form of uncollected taxes and local cryptocurrency service providers due to reduced trading activity as traders shift to offshore exchanges.