India’s Caution: Crypto Framework Delayed Over Systemic Risk Concerns–Reuters

A recent Reuters report reveals that India is leaning toward avoiding the establishment of a comprehensive legislative framework for regulating cryptocurrency, which is in stark contrast to countries like the United States. Instead, the Indian government plans to maintain partial oversight, driven by concerns that fully integrating digital assets into the mainstream financial system could pose alleged “systemic risks.” India Delays Crypto Legislation A document reviewed by Reuters details the Indian government’s perspective and reflects the views of the Reserve Bank of India (RBI). The document argues that effectively managing the risks associated with cryptocurrencies through regulation would be ￰0￱ global acceptance of cryptocurrencies has grown significantly, particularly in the US, where President Donald Trump has led a new regulatory era for the digital asset industry with the passage of key bills aimed at fostering a more supportive environment for the adoption and usage of cryptocurrencies.

Meanwhile, while China maintains a ban on cryptocurrencies, it is reportedly considering a Yuan-backed ￰1￱ countries, such as Japan and Australia, are developing regulatory frameworks for digital assets as ￰2￱ Indian government document suggests that formal regulation of cryptocurrencies could lend them “legitimacy” and potentially make the sector ￰3￱ is not the first time India has grappled with the issue of digital asset ￰4￱ 2021, the government drafted a bill aimed at banning private cryptocurrencies but ultimately chose not to advance the ￰5￱ its G20 presidency in 2023, India called for a global framework to regulate digital assets, but plans to issue a discussion paper on the country’s stance were ￰6￱ government indicated it would reassess its position after observing how the US formalizes cryptocurrency ￰7￱ Threatening Digital Payment Integrity?

Currently, global digital asset exchanges are allowed to operate in India, provided they register with a local government agency that conducts due diligence to mitigate money laundering risks. However, the RBI has consistently warned about the dangers associated with cryptocurrencies, leading to a significant slowdown in trading activities between India’s formal financial system and digital ￰8￱ these challenges, Indians have invested approximately $4.5 billion in various digital assets, although the document notes that this level of investment does not currently present a systemic risk to financial ￰9￱ report also highlights the implications of the US adopting dollar-backed stablecoins and promoting them as payment instruments , especially after the passage of the GENIUS Act, a foundation for the full usage of these ￰10￱ Indian government further asserted that the widespread use of stablecoins could risk fragmenting national payment systems, such as the Unified Payment Interface (UPI), thereby undermining the integrity of India’s digital payments ￰11￱ image from DALL-E, chart from ￰12￱