PHEW!

A global financial body, which includes India, says cryptocurrencies aren’t a threat

No bad news is good news.
No bad news is good news.
Image: REUTERS/Lucy Nicholson
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Finally there’s some good news for the Indian cryptocurrency ecosystem—and this one’s from a global financial body.

An inter-governmental body that makes recommendations about the health of the world economy has said that virtual currencies are not a threat.

The observation was made by the Financial Stability Board (FSB), which counts over 20 countries as its members, including the US, UK, China, and India. The assessment came to light after India’s central bank, the Reserve Bank of India (RBI), quoted the agency in a report released last week. ”The FSB has undertaken a review of the financial stability risks posed by the rapid growth of crypto-assets. Its initial assessment is that crypto-assets do not pose risks to global financial stability currently,” the RBI report said.

Nevertheless, the central bank also added a note of caution as it has adopted a wait-and-watch policy towards crypto assets. “The market continues to evolve rapidly, however, and this initial assessment could change if crypto-assets were to become more widely used or interconnected with the core of the regulated financial system,” the RBI noted.

The FSB was established in 2009 by finance ministers and central bankers from G-20 nations in the aftermath of the global financial crisis. Even though the recommendations of the FSB are not legally binding on member countries, they are typically adhered to, so as to ensure that the international standards are maintained. Its latest observation on cryptocurrency, therefore, comes as a ray of hope for the battered global crypto-ecosystem.

Sinking prices and unfavourable regulations have hit the industry in several geographies, including India. Till now, neither India’s central bank nor prime minister Narendra Modi’s government have taken a favourable stance. Since July 2018, on the RBI’s behest, lenders have been banned from pursuing any banking relationship with the  cryptocurrency exchanges and traders.

Meanwhile, the government has been studying virtual currencies for nearly two years now but hasn’t come out with any specific regulations on it, yet. Last week, the Indian parliament was also informed that the government is still studying the issue and has not even set a deadline for coming out with specific norms for the ecosystem.

The Indian cryptocurrency exchanges and traders have been demanding clarity in regulations, as they prefer that to an outright clampdown. “Sometimes, no regulation is not bad news. It probably means that the government of India does not see cryptocurrencies as a matter of immediate concern, or something that needs to be regulated right away. This at least means that fears of a ban are not imminent,” said Nischal Shetty, CEO of WazirX, an Indian cryptocurrency exchange.

Certain other FSB member countries, such as the US, are also yet to come out with draft regulations on cryptocurrencies, which may end up setting a precedent for the rest. “The US has been deliberating on digital currencies for the last 12-18 months and for 2019 the (market regulator) Securities and Exchange Commission has mentioned digital assets as a priority. It is expected that other countries including India will also take a cue from the US and will come out with concrete laws after it,” added Shetty.

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