Customize Consent Preferences

We use cookies to help you navigate efficiently and perform certain functions. You will find detailed information about all cookies under each consent category below.

The cookies that are categorized as "Necessary" are stored on your browser as they are essential for enabling the basic functionalities of the site. ... 

Always Active

Necessary cookies are required to enable the basic features of this site, such as providing secure log-in or adjusting your consent preferences. These cookies do not store any personally identifiable data.

No cookies to display.

Functional cookies help perform certain functionalities like sharing the content of the website on social media platforms, collecting feedback, and other third-party features.

No cookies to display.

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics such as the number of visitors, bounce rate, traffic source, etc.

No cookies to display.

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

No cookies to display.

Advertisement cookies are used to provide visitors with customized advertisements based on the pages you visited previously and to analyze the effectiveness of the ad campaigns.

No cookies to display.

RBI Releases Financial Stability Report With Mention of DeFi, US Efforts to Regulate Crypto Sector

Share

The Reserve Bank of India (RBI) has published its latest Financial Stability Report (FSR) that outlines important events that have recently taken place in the national and international banking and fintech sector. The domain of decentralised finance (DeFi) earned a brief mention in RBI’s report wherein the central bank, discussed the focus of global bodies on developments in the sector. The RBI has also touched upon efforts by the US to regulate the crypto sector.

RBI’s FSR report mentions DeFi technology

In its FSR report, the RBI acknowledged that digital financial systems have seen adoption around the world, leading to the creation of newer business models and financial distribution channels.

The advanced technologies of distributed ledger (blockchain), cloud computing, artificial intelligence (AI), and machine learning (ML), as per the RBI, have shown to have pertinent implications for financial systems around the world.

Talking in particular about DeFi, the report said that global regulatory bodies like the Financial Action Task Force and the International Organisation of Securities Commissions (IOSCO) are constantly examining developments around DeFi. These global financial whistleblowers are concerned that a rapid growth in DeFi could have effects on the broader asset market and subsequently on the global financial stability.

US efforts to regulate the crypto sector

The central bank notes that the US government is attempting to create a regulatory framework for digital assets, in the form of the Financial Innovation and Technology for the 21st Century Act (FIT21) legislation. The FIT21 Act is expected to and empower the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to oversee digital assets, venues and entities. As per the RBI, the FIT21 Act is also expected to ensure market certainty, while granting some form of recognition to digital assets in the country.

The RBI report also touches upon the US SEC’s decision to approve the trading of exchange traded products (ETPs) for select cryptocurrencies like Bitcoin and Ether ETFs.

On the other hand, India’s central bank has expressed concerns around the rising number of cybercrimes connected with the crypto sector on an international level.

“Ransomware crypto payments, business email compromises and cost of data breaches surged to a new high during 2023. The financial sector has reported over 20,000 cyber intrusions and digital attacks, which resulted in losses amounting to US$ 20 billion over the last 20 years. Furthermore, cyberattacks are found to swell during periods of political and economic uncertainty such as geopolitical tensions, with disruptive consequences,” the report noted.

RBI’s stance on crypto in India appears to be unchanged

The RBI has repeatedly said it prefers that crypto be banned in the country. Since cryptocurrencies allow anonymity in transactions, the central bank is concerned that crypto assets could be exploited for illicit activities like terror financing and money laundering. The crypto sector also gives people more control over their funds and eliminates the need for intermediaries like banks to process financial transactions, which threatens the monopoly of central banks on their respective financial systems.

Even so, the DeFi sector was mentioned once in RBI’s report, and industry members in the country are already hopeful about the future of the fintech sector in India.

“The RBI released its half-yearly Financial Stability Report (FSR) today. There is very little in there for the crypto asset sector, which could be both good, or bad, depending on which way one looks at it! There is no specific negative commentary on financial stability risks from digital assets, which could again mean something, or nothing, depending on which way one looks at this,” said R Venkatesh, Head of Public Policy, CoinSwitch as commenting on the development.

The latest report appears to reaffirm the RBI’s unwillingness to accept cryptocurrencies as legitimate modes of payments in the country in the near future.


Affiliate links may be automatically generated – see our ethics statement for details.