Description
a background note prepared for the Parliamentary Standing Committee on Finance, which is examining the subject “A Study on Virtual Digital Assets (VDAs) and Way Forward”, the central bank said the existing global regulatory framework remains insufficient to address the broader macroeconomic risks posed by crypto assets, particularly in emerging market and developing economies such as India.
The RBI observed that while the Financial Stability Board (FSB) has evolved a regulatory framework for crypto assets and global stablecoins, critical issues such as currency substitution, erosion of monetary policy effectiveness, capital flow management, bank disintermediation and loss of seigniorage remain “under-explored”. It cautioned that formalising cryptocurrencies without a comprehensive assessment of these risks could expose the financial system to “significant, potentially uncontrollable risks”, especially if their adoption becomes widespread.