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RBI lists risks of stablecoins for developing economies, calls for global regulation

Press Releases Crypto News Cointelegraph RBI lists risks of stablecoins for developing economies, calls for global regulation

Stablecoins have a lot of potential to harm emerging markets and developing economies, the Reserve Bank of India (RBI) claimed in its latest Financial Stability Report, released June 28. The report listed six threats that stablecoins present.

The RBI has been a steadfast critic of cryptocurrency, but it was particularly articulate about the problems it sees with stablecoins “from an EMDE [emerging markets and developing economies] perspective.” It listed six specific problems, even though:

“The lack of authenticated data and inherent data gaps in the crypto ecosystem impede a proper assessment of financial stability risks.”

A stablecoin could threaten an EMDE through currency substitution, as its underlying assets are generally denominated in freely convertible foreign currency, the report claimed. The “cryptoisation” of the economy that could result from large-scale stablecoin adoption could lead to currency mismatches “on the balance sheets of banks, firms, and households.”

News Alert | RBI Financial Stability Report: Governor Shaktikanta Das on importance of tech, opportunities for growth and global cooperation among regulators #RBIFinancialStabilityReport #RBI @RBI @DasShaktikanta pic.twitter.com/D5dwkYcjwn

— ET NOW (@ETNOWlive) June 28, 2023

An EMDE central bank could face problems setting the domestic interest rate and liquidity condition due to the presence of stablecoins in the economy, the RBI continued. Furthermore, the “decentralised, borderless, and pseudonymous characteristics of crypto-assets […] make them potentially attractive instruments to circumvent capital flow management measures.”

By presenti

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Author: Derek Andersen

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