India Wants to Make Global Crypto Regulation Top Priority of G20 Presidency
Earlier today, the Reserve Bank of India published its financial stability report. According to the document, the nation wants to use its G20 presidency, assumed on December 6th, to coordinate global crypto regulation.
RBI Calls for Global Crypto Regulation
While 2022 has seen major leaps when it comes to cryptocurrency regulation—including the White House’s first regulatory framework on digital assets—many events throughout the year demonstrated that there is still a long way to go. The collapse of the crypto exchange FTX in particular caused many to question whether regulators like the SEC are doing enough to protect investors, and just how far behind the curve they are.
In its report on financial stability published on December 29th, the Reserve Bank of India identified three ways to move forward when it comes to the cryptocurrency sector. According to the document, digital assets can be outright banned, regulated like traditional financial intermediaries, or let them “implode” and thus make them “systemically irrelevant”.
According to the RBI, the real-life use cases of cryptocurrencies are “next to negligible” but the challenge preventing an outright ban comes in the form of different “legal systems and individual rights vis-à-vis state powers” in various countries. The report cautions against letting digital assets “implode” by stating they “may become more interconnected with mainstream finance and divert financing away from traditional finance”. This would, in turn, make the effects of any “implosion” highly damaging across the board.
Ultimately, RBI’s report concludes that a global regulatory framework for digital assets is needed to “promote responsible innovation and to mitigate financial stability risks”. The document concedes that “regulating new technology and business models” after they reach a certain level is challenging and expressly states that one of the top goals of India’s G20 presidency will be the creation of a global regulatory framework for cryptocurrencies.
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RBI’s Analysis of Major Crypto Calamities Throughout 2022
RBI’s report also made an extensive analysis of the events that rocked the cryptocurrency sector throughout 2022 before reaching its concussion on the need for a worldwide regulatory framework. The collapse of LUNA and the bankruptcy of FTX were extensively discussed along with their respective contagions.
Since LUNA’s collapse caused extensive damage and led to the bankruptcy of firms like the Celsius Network, it was used to demonstrate the instability of the digital assets sector. FTX was also used as an example, although the effects of its downfall have only begun to show with the bankruptcy of BlockFi.
RBI also discussed Bitcoin’s 74% price drop as an example of the volatility of digital assets. The need for more extensive cryptocurrency regulation has been recognized throughout the world in 2022 with agencies like the SEC and the CFTC actively vying for more control over the sector.
Do you think the G20 will successfully create a global regulatory framework for cryptocurrencies? Let us know in the comments below.