According to the Financial Stability Report published by the Reserve Bank of India (RBI) on December 29th, coming to a consistent strategy to crypto assets is necessary to address possible financial stability issues and safeguard investors.
According to the report, one possible solution is to regulate them in the same way as conventional financial intermediaries and exchanges, i.e., by using the same-risk-same-regulatory-outcome concept.
The second option is to prohibit the usage of crypto assets altogether since the likelihood of their having any practical use in the real world is very low. Having said that, this strategy ran into problems due to the fact that various nations have varying legal systems and distinct rights for individuals.
Allowing it to disintegrate while simultaneously rendering it unimportant to the larger system is the third possibility being explored. According to the RBI, the underlying volatility and riskiness would eventually hinder the industry from flourishing.
The bank went on to say that despite the fact that the market for crypto assets is still very volatile, there have not been any spillovers onto the stability of the traditional financial system as of now.
The gathered information, on the other hand, points to the fact that they constitute an unstable ecology, and there is more and more proof that they continue to be highly concentrated and linked.
The RBI pointed out that it is difficult to regulate new forms of technology and business models after such forms have reached a systemic degree of development.
According to the report, it is essential for policymakers to create an appropriate regulation framework in order to support responsible innovation and to limit threats to the financial stability of the cryptocurrency ecosystem.
