Indian Central Bank says stablecoins may harm the developing economy
The Reserve Bank of India (RBI) slammed the surging adoption & use cases of stablecoin in the traditional financial ecosystem.
The Reserve Bank of India (RBI) is the central bank authority of India, which regulates the banks & banking sector in the country. This centrak bank has been a big hater of the Crypto sector but loves blockchain technology. At present, RBI is testing its retail digital Rupee (Indian CBDC) in collaboration with some commercial banks.
On 28 June 2023, The Reserve Bank of India (RBI) published a new Financial Stability Report and mentioned stablecoins as a risky sector for the traditional as well as the emerging financial sectors.
However, RBI is known as a crypto hater but this time it failed to talk about cryptocurrencies but dragged all the stablecoins businesses & related financial activities on its radar.
According to the central bank, stablecoins may negatively impact emerging markets and developing economies (EMDE) by replacing the fiat currency. RBI believes that the adoption & use of several stablecoins will further lead to a problem of currency mismatch & that will create a big problem for the banks, firms, and households to maintain the balance sheet.
Furthermore, the RBI report noted that the decentralised nature of stablecoins transactions poses a big risk to the role of domestic banks and further that will create a problem for the bank to track the amount of funds flow (domestic & cross border trades).
To fight against such risks, the RBI report suggested going ahead to bring a highly coordinated international regulatory framework.
“A globally coordinated approach is warranted to analyze risks posed to EMDEs vis-à-vis AEs (advanced economies)…(…)… In this context, under India’s G20 presidency, one of the priorities is to create a framework for global regulation of unbacked crypto-assets, stablecoins, and DeFi,” RBI financial report read.
Earlier this Indian finance ministry proposed the concept of international crypto regulation bill during the G-20 meetings this year, which was under the presidency of India.
At present, the majority of the crypto companies are operating their business under the existing traditional financial rules in the jurisdiction of India. In early 2022, the Indian finance ministry proposed a new crypto tax rule, under which crypto traders are required to pay 1% TDS + 30% tax on profit made against every crypto transaction.
Read also: Ripple legal officer says we’re at the end of our journey with the SEC
