RBI hits hard on crypto platform

The Reserve Bank of India (RBI) has slammed unbacked crypto-assets (such as Bitcoin), stablecoins, and decentralized finance (Defi), and crypto-asset trading platforms, underscoring the need for regulatory guardrails to ensure financial stability and consumer and investor protection. 

In its annual ‘Financial Stability Report’ (FSR) 2022, India’s central bank and regulatory body said that the early ramifications are reflected in the crypto ecosystem with one stablecoin losing almost all its value and another depegging from the US dollar. 

It referred to the collapse of TerraUSD and Luna cryptocurrencies that threw many investors into a panic in May. In a crash, the once bullish TerraUSD and sister coin Luna lost almost all their value, sending shock waves worldwide. 

“Several vulnerabilities associated with crypto-asset markets have been highlighted such as linkages between crypto-asset markets and the regulated financial system; liquidity mismatch, credit and operational risks, with the potential spillover to short-term funding markets; increased use of leverage in investment strategies; concentration risk of trading platforms; and opacity and lack of regulatory oversight of the sector,” the RBI report highlighted.