India Expresses Fear Of Impact Of Cryptocurrencies On The Financial System

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india

The committee formed by the Indian government to draft Crypto regulations has said that if Cryptocurrencies are accepted as payments, they could destabilize the local currency. Although Cryptocurrencies remain banned in the world’s largest democracy, the government is working around the clock to put regulations in place. The recent observation by the panel is contrary to a report published by the Financial Stability Board (FSB) that stated that virtual currencies do not pose a significant risk to global financial stability.

Cryptocurrencies Could Affect The Rupee

India is among the countries that are considering regulating the Crypto sector. To achieve this, the government created a committee that is led by the Secretary of the Department of Economic Affairs, Subhash Chandra Garg. The agency has been approaching the issue with caution since it commenced its sitting over a year ago. Quartz India recently reported that the committee appears to be ”obsessed” with the effect virtual currencies would have on rupee when legalized for their use in payment settlement.

The publication quoted an unnamed representative saying that they are concerned on how legalization of Cryptocurrencies and their use in payments would affect fiat currency. The source added that it is unclear how the virtual currencies would affect the country’s financial system. The unnamed person noted that it will be a challenge to convince the government on this particular issue.

Garg’s Panel To Present Cryptocurrency Regulation Recommendations

India-based Crypto dealers are eagerly waiting for the country to come out clear on its stand on Cryptocurrency regulation. It appears the government is not willing to follow the Chinese way of completely banning virtual currencies. However, even if the government will legalize the sector, having strong and clear regulations will help in protecting the interests of the local population and support the growth of the nascent industry.

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Garg’s panel is already concluding its report that will contain recommendations on Cryptocurrency regulation in the country. However, no specific date has been given when the report will be ready. The Ministry of Finance recently told Parliament that it is a challenge to say when the panel will table the report. The ministry only noted that the matter is being pursued with due caution.

FSB Says Cryptocurrencies Are Not A Threat

The question on the impact of Cryptocurrencies on the financial system has been around since the launch of the first coin, Bitcoin, over a decade ago. According to a report published by the Financial Stability Board (FSB) October last year, Cryptocurrencies don’t pose any risk to the financial stability currently. However, the group said that due to the fast-changing nature of Cryptocurrencies, vigilant monitoring is essential. The agency further noted that if the sector continued to evolve, it could affect the financial stability in the future.

FSB is a global body tasked with the responsibility of monitoring and making recommendations on the international financial system. The group reports to G20. G20 is a convention that brings together leaders and senior government officials from the world’s largest economies. In its report titled Trend and Progress of Banking in India 2017-18, the Reserve Bank of India (RBI) cited FSB’s findings and said that altcoins are not a threat currently.

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