RBI warns of digital asset threat to financial stability
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Homepage > News > Finance > Reserve Bank of India warns of digital asset threat to financial stability The Reserve Bank of India (RBI) warned in its December 2024 Financial Stability Report that the widespread use of digital assets, stablecoins, and tokenization based on blockchain could create significant vulnerabilities to financial stability. “Widespread usage of crypto-assets and stablecoins has consequences for macroeconomic and financial stability. As highlighted in the IMF-FSB synthesis paper, it could reduce the effectiveness of monetary policy, worsen fiscal risks, circumvent capital flow management measures, divert resources available for financing the real economy and threaten global financial stability,” RBI’s report warned. “Even though the size of crypto-asset markets remains small, their continued growth and increasing linkages with the traditional financial system could pose systemic risks. Stablecoins also present potential run risks,” the report added. Prices of BTC, the world’s largest digital currency, surpassed the $100,000 threshold, hitting a record high of over $108,000 on December 17 following United States President-elect Donald Trump’s victory on November 6 as investors stayed positive over his second presidential term. The price of BTC has more than doubled in 2024 alone. “Crypto-assets’ prices swung wildly and the rally, which faded during March-September 2024, was boosted subsequently, especially after the U.S. election outcome. This has also fuelled market capitalisation of stablecoins, which are primarily used to enable lending, borrowing and trading of other digital assets and support the crypto ecosystem,” the RBI report pointed out. The RBI has always been suspicious of digital assets, going so far as to recommend a complete ban on their trading. However, the government imposed one of the harshest taxes on digital asset trading—a 30% flat tax on all digital asset income from April 2022 and a 1% tax deducted at source (TDS) from July 2022 on all digital asset trades above 10,000 Indian rupees (US$116). India also does not allow digital asset traders to offset losses against…
Filed under: News - @ January 8, 2025 2:20 pm