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The Reserve Bank of India (RBI) has stated that cryptocurrencies do not currently pose a threat to financial stability in its recent financial report published on 28 December.
The document entitled "Report on trends and progress of the banking sector in India 2017-18" reads:
"[C]rypto resources currently do not pose a risk to global financial stability. However, the market continues to evolve rapidly and this initial assessment could change if the crypto assets become more widely used or interconnected with the core of the regulated financial system.
The RBI cited a conclusion drawn from a recent report by the Financial Stability Board (FSB) – an international agency consisting of banking and financial institutions from several countries, including India. The same RBI is a member of the FSB, together with the Securities and Exchange Board and the Ministry of Finance of the country.
In its study "Crypto-asset markets: potential channels for future financial stability implications" published in October, the FSB stated that bankers see no significant danger in the existence of cryptocurrencies, as their total capitalization at that time had just reached 2% of the global value of gold. However, the council has invited watchdogs to keep the digital coin markets in check, given their rapid growth.
The RBI reiterated this position in its December report, stating that its "cryptocurrencies" need "constant monitoring", given their rapid expansion in recent years.
The legal framework for cryptocurrencies in India remains unclear, as the RBI has formally blocked all banks from dealing with cryptocurrencies in April. The de facto prohibition came into force in June, while the Supreme Court hearings on the case – initiated by local crypto societies – were repeatedly postponed. At the same time, an Indian government group reportedly is considering a total ban on cryptography.
Initially, the RBI had considered the idea of launching its own central bank digital currency, dubbed "Laxmi". However, in January, the bank renounced the idea of creating a stablecoin linked to the rupee, stating that it is too early to think about it.
Yesterday, January 3, the police of the Indian state of Jammu and Kashmir issued a statement, warning the public not to invest in cryptocurrencies because of the "greater risk" associated with them. The authorities also added that digital currencies are not regulated by the Indian government.
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