Skip to main content

'Important to arrive at a common international approach to crypto': RBI

By

 The Crypto market remains volatile, and cryptocurrencies form "an unstable ecosystem", the Reserve Bank of India (RBI) said in its Financial Stability Report (FSR) released on Thursday. To address financial stability risks and protect investors, it is important to arrive at a "common approach to crypto assets", the report added.  "Although the crypto assets market remains volatile, there have not yet been any spillovers onto the stability of the formal financial system. The accumulated experience, however, suggests that they form an unstable ecosystem and there is growing evidence that they remain highly concentrated and interconnected," it said. The FTX turmoil, RBI said, revealed that crypto is highly volatile and exhibits "high correlations" with equities. It has also not served as a hedge against inflation. "Contrary to claims that they are an alternative source of value due to inflation hedging benefits, crypto assets value has fallen even as inflation rose," the report said. Since its peak in November 2021, Bitcoin has fallen over 70 per cent. "Leverage is a constant theme across the crypto ecosystem, making failures rapid and losses huge and sudden," it added. 'Considering various options' To prevent further fallout, the RBI said it was considering various options internationally. The first option was to apply the "same-risk-same-regulatory-outcome" principle and subject crypto to the same regulation applicable to traditional financial intermediaries and exchanges. The second option was "to prohibit crypto assets since their real-life use cases are next to negligible". However, the challenge to this approach was that different countries have different legal systems and individual rights. The third option being considered was "to let it implode and make it systemically irrelevant". The underlying instability and riskiness will ultimately prevent the sector from growing, RBI said. This, too, had several risks as crypto may become more interconnected with mainstream finance and divert financing away from traditional finance with a broader effect on the real economy, the report added.

 

'Design appropriate policy approach'

 

RBI further said that policymakers must design an appropriate policy approach to mitigate financial stability risks and promote "responsible innovation". "In this context, under India's G20 presidency, one of the priorities is to develop a framework for global regulation, including the possibility of prohibition of unbacked crypto assets, stablecoins and decentralised finance (Defi)", it said. The report also recalled the Financial Stability Board's (FSB's) framework for international regulation of crypto assets which was introduced in October. FSB had proposed that authorities should have "appropriate powers, tools and resources to regulate, supervise, and oversee crypto assets activities and markets, both domestically and internationally". It also pitched for "promoting comprehensive governance and effective risk management frameworks".

 

 

-2nd January, 2022

Comments

Post a Comment

Popular posts from this blog

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the...
Post a Comment
Read more

SFBs should be vigilant, proactive to mitigate risks: RBI deputy guv

By
  The Reserve Bank of India’s Deputy Governor Swaminathan J on Friday instructed the directors of small finance banks (SFBs) to be vigilant and proactive in identifying emerging risks in the sector.Speaking at a conference for directors on the boards of SFBs, Swaminathan highlighted the role of governance in guiding SFBs towards sustainable growth with stability. He also emphasised the importance of sustainable business models.Additionally, he highlighted the need for strengthening cybersecurity to protect the entities against digital threats and urged for a stronger focus on financial inclusion, customer service, and grievance redressal to ensure a broader reach of banking services.Executive Directors S C Murmu, Rohit Jain, and R L K Rao, along with other senior officials representing the Supervision, Regulation, and Enforcement Departments of the RBI, also participated in the conference.   -  Business Standard  30 th  September, 2024
Post a Comment
Read more

Brigade Hotel Ventures files draft papers with Sebi for Rs 900 crore IPO

By
  Brigade Hotel Ventures Ltd, owner and developer of hotels in South India, has filed draft papers with capital markets regulator Sebi to raise Rs 900 crore through an initial public offering (IPO).The proposed IPO is entirely a fresh issue of equity shares with no Offer-for-Sale (OFS) component, according to the draft red herring prospectus (DRHP).Proceeds from the issue to the tune of Rs 481 crore will go towards payment of debt, Rs 412 crore will be allocated to the company and Rs 69 crore to its material subsidiary, SRP Prosperita Hotel Ventures Ltd.Additionally, Rs 107.52 crore will be used to purchase an undivided share of land from the Promoter, BEL, and the remaining funds will support acquisitions, other strategic initiatives, and general corporate purposes.The company may raise up to Rs 180 crore through a Pre-IPO Placement.   If the placement is undertaken, the issue size will be reduced.Brigade Hotel Ventures Ltd is a wholly-owned subsidiary of Brigade Enterprises ...
Post a Comment
Read more