Cryptocurrencies Present a Clear Risk – Financial Stability Risks Likely to Grow – Regulation Bitcoin News

India’s central bank, the Reserve Bank of India (RBI), sees cryptocurrencies as a “clear risk”. However, the financial stability risks posed by crypto assets currently appear to be “limited.”

RBI on Cryptocurrency Risks and Financial Stability

The Reserve Bank of India (RBI) released the 25th issue of its Financial Stability Report (FSR) on Thursday. Reserve Bank of India Governor Shaktikanta Das wrote:

Cryptocurrencies are a clear danger. Anything that derives value based on faith, without any basis, is just speculation under a complicated name.

The RBI chief further opined: “While technology has supported the access of the financial sector and its benefits must be fully harnessed, its ability to disrupt financial stability must be protected.”

The Central Bank of India report explores the financial stability risks posed by crypto assets, citing various studies, including the work of the Financial Stability Board (FSB). The report stated:

The risks from crypto assets to financial stability currently appear to be limited because the total volume is small (0.4 percent of global financial assets).

In addition, the report notes that “the interconnection of cryptocurrency with the traditional financial system is constrained.”

However, the report adds:

However, the associated risks are likely to increase as these assets and the ecosystem that supports their growth evolve.

The report also discusses stablecoins and central bank digital currencies (CBDCs). The Reserve Bank of India noted: “Risks from stablecoins claiming to maintain a constant value against existing fiat currencies requires careful monitoring, in particular.”

The Reserve Bank of India (RBI) statement on financial stability and cryptocurrency echoes the comments of Christine Lagarde, President of the European Central Bank (ECB) on the matter. “Crypto assets and decentralized finance (the challenge) are likely to pose real risks to financial stability,” she said in June. “This will be particularly the case if the rapid growth of crypto-asset markets and services continues… and the interconnectivity with both the traditional financial sector and the broader economy intensifies.”

What do you think of the Indian central bank’s comments? Let us know in the comments section below.

Kevin Helms

Kevin, an Austrian economics student, found bitcoin in 2011 and has been a missionary ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection of economics and cryptography.

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