Nations can still ban private crypto assets if they want: RBI Governor Shaktikanta Das

The recent recommendations by international financial regulation agencies on the governing of private cryptocurrencies do not take away the various nations’ prerogative of banning the digital assets if they so want, Reserve Bank of India Governor Shaktikanta Das said on Tuesday.

Addressing the media at the end of the G-20 meeting of Finance Ministers and Central Bank Governors (FMCBG), Das said that many members have recognised the potential of the usage of central bank digital currencies (CBDC) in cross border payments, paving the way for further discussions on the matter.

“On CBDCs there is a perceptible change in thinking. It is now recognised by a large number of countries, that CBDC is an important aspect which needs to be looked at more seriously. As part of deliberations, it was recognised that there is great potential for CBDCs to facilitate easier and smoother cross border payments. There is a need to take this agenda forward,” Das said, addressing the media alongside Finance Minister Nirmala Sitharaman.

The FMCBG Meeting concluded Tuesday, with an outcome document and chair summary that saw member countries agreeing to almost all issues ranging from common framework from debt, strengthening multilateral development banks and the swift implementation of the Crypto-Asset Reporting Framework.

Das said that CBDCs essentially are new currencies and will mean a fundamental change in the system of money across the world, and hence widespread adoption will take time.

He said that reports by two bodies – the Financial Stability Board and the Bank for International Settlements – on regulating crypto assets, do not rule out banning them outright.

“The FSB report is focusing on how to regulate. What they have proposed is information sharing, transparency of data, and several other steps. It does not go into the critical issues of financial stability and other implications. It also recognises that individual jurisdictions also have the choice to prohibit cryptocurrencies if they so desire,” Das said.

He said that the BIS report is much more forthright and recognises that there could be three approaches: prohibition, regulation, or allowing such assets without any restrictions. “These reports recognise what we have been talking about, the macro-financial implications, and the huge risks involved in crypto currencies.” The RBI has been one of the foremost proponents of banning private cryptocurrencies outright, citing risks to the monetary system.

“We welcome discussions on the potential macro-financial implications arising from the introduction and adoption of CBDCs, notably on cross-border payments as well as on the international monetary and financial system,” the FMCBG said in its chair summary.

The reason why it released a ‘chair summary’ and not a ‘communique’ is because the latter requires unanimous approval of all the members. And the G-7 and Russia-China blocs once again disagreed on the use of the language on the war in Ukraine.

“Recognising that the G20 is not the forum to resolve security issues, we acknowledge that security issues can have significant consequences for the global economy… The peaceful resolution of conflicts, efforts to address crises, as well as diplomacy and dialogue are vital. Today’s era must not be of war,” the chair summary stated.