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RBI hits hard on Bitcoin, DeFi, crypto trading platforms
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IANS | 01 Jul, 2022
The Reserve Bank of India (RBI) has slammed unbacked crypto assets (such
as Bitcoin), stablecoins and decentralised finance (DeFi) and crypto
asset trading platforms, underscoring the need for regulatory guardrails
to ensure financial stability and consumer and investor protection.
In its annual 'Financial Stability Report' (FSR) 2022,
India's central bank and regulatory body said that the early
ramifications are reflected in the crypto ecosystem with one stablecoin
losing almost all its value and another depegging from the US dollar.
It
referred to the collapse of TerraUSD and Luna cryptocurrencies that
threw many investors into a panic in May. In a crash, the once bullish
TerraUSD and sister coin Luna had lost almost all their value, sending
shock waves across the world.
"Several vulnerabilities associated
with crypto asset markets have been highlighted such as linkages
between crypto asset markets and the regulated financial system;
liquidity mismatch, credit and operational risks, with the potential
spillover to short term funding markets; increased use of leverage in
investment strategies; concentration risk of trading platforms; and
opacity and lack of regulatory oversight of the sector," the RBI report
highlighted.
The International Organisation of Securities
Commissions has noted that DeFi is a spectrum and not a 'binary
outcome', and that some DeFi products and services may retain a level of
centralisation through concentrated ownership of the 'governance
tokens', or by restricting the governance decisions for users.
"The
risks associated with DeFi include speculative trading, flash loans,
cross-border lending and borrowing, front running, cybersecurity,
asymmetry and fraud," said the RBI.
This has stressed the need
for continuous examination of this evolving landscape and its
implications for traditional financial institutions.
"The growing threat of the crypto-assets ecosystem warrants drastic approaches by national authorities," the RBI noted.
Global regulatory efforts continue to focus on risks associated with the crypto ecosystem and the threat of decentralisation.
Stablecoins
-- whose value is pegged to another asset like a fiat currency or a
commodity -- are bad investments and are ill-suited as a form of money,
Siddharth Tiwari, the Asia-Pacific head of the Bank of International
Settlements (BIS), said last week.
RBI Governor Shaktikanta Das
said that cryptocurrencies are a clear danger to the financial systems,
adding that the world must be mindful of the emerging risks on the
horizon.
Finance Minister Nirmala Sitharaman has announced that
the RBI will roll out the Central Bank Digital Currency (CBDC) in FY23
that will be based on Blockchain technology.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
84.35
|
82.60 |
UK Pound
|
106.35
|
102.90 |
Euro
|
92.50
|
89.35 |
Japanese
Yen |
55.05 |
53.40 |
As on 12 Oct, 2024 |
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