Turkey

The RBI’s latest financial stability report accentuated the negative about cryptocurrency and reminds the world that India is looking for global action on crypto regulation.

The Reserve Bank of India (RBI) has again expressed concerns about the burgeoning crypto ecosystem and suggested parts of it could be banned. In its latest financial stability report, released Dec. 29, the central bank said it would use its rotating presidency of the G20 group of the world’s largest economies to call for the development of a global regulatory framework of crypto assets.

The report was generally upbeat about current conditions in the country, despite “strong global headwinds,” saying, “the Indian economy and domestic financial system remain resilient.” The tone changed drastically in its discussion of crypto, however, as it highlighted a familiar laundry list of crises that struck the cryptoverse in 2022. It noted crypto’s volatility, high correlation with equities and its inadequacy as a hedge against inflation, as well as issues with governance, and added:

“Leverage is a constant theme running across the crypto ecosystem, making failures rapid and losses huge and sudden.”

Be that as it may, rising prices in that ecosystem drive crypto’s popularity, especially in the “younger segment of the population.” The report concluded:

“To address potential future financial stability risks and to protect consumers and investors, it is important to arrive at a common approach to crypto assets.”

The report saw three options for crypto regulation. The first was “the same-risk-same-regulatory-outcome principle.” Second, it suggested the possibility of a prohibition of crypto assets “since their real-life use cases are next to negligible.” This option would be complicated by “different legal systems and individual rights vis-à-vis state powers” globally. A third option, “let it implode” without regulatory action, was considered too risky for mainstream finance to pursue. The report noted that:

“Under India’s G20 presidency, one of the priorities is to develop a framework for global regulation, including the possibility of prohibition, of unbacked crypto assets, stablecoins and DeFi.”

Related: Crypto could spark the next financial crisis, says India’s RBI head

Crypto regulation was a G20 priority for India from the beginning of its presidency. Despite the government’s generally negative position on cryptocurrency, there are an estimated 115 million users in India. The RBI is more bullish on central bank digital currency. India also has one of the world’s largest Web 3 workforces.

As the meetings of the first month of #G20India conclude, here’s a summary of the priorities of Finance Track: @FinMinIndia @RBI pic.twitter.com/a9IyY41tW6

— G20 India (@g20org) December 22, 2022

After recently completing its first payment transactions using a central bank digital currency, the Turkish central bank is pushing ahead with more tests over 2023.

The Central Bank of the Republic of Turkey (CBRT) has completed the first trial of its central bank digital currency (CBDC), the Digital Turkish Lira, and has signaled plans to continue testing throughout 2023. 

According to a statement released by the CBRT on Dec. 29, the central bank authority said it successfully executed its “first payment transactions” using the digital lira.

It said it will continue to run limited, closed circuit pilot tests with technology stakeholders in the first quarter of 2023, before expanding it to include selected banks and financial technology companies in the rest of the year.

Press Release on the Use of Digital Turkish Lira: https://t.co/48ulWfJqXw

— CentralBankofTürkiye (@CentralBank_TR) December 29, 2022

It said the results of these tests will be shared with the public through a “comprehensive evaluation report,” before unveiling more the next phases of the study which will further widen participation.

The Turkish central bank first announced it was looking into the benefits of introducing a digital Turkish Lira in September 2021 in a research project called “Central Bank Digital Turkish Lira Research and Development.”

At the time, the government made no commitment to the ultimate digitalization of the country’s currency, noting it had “made no final decision regarding the issuance of the digital Turkish lira.”

In its most recent statement, the CBRT said it will continue testing the use of distributed ledger technologies in payment systems and their “integration” with instant payment systems.

It will also prioritize studying the legal aspects around the digital Turkish Lira, such as the “economic” and “legal framework” around digital identification, along with its technological requirements.

Related: CBDCs are no threat to crypto — Binance CEO

Several countries, including the United Kingdom and Kazakhstan, have recently begun piloting central bank digital currencies.

The Bank of England has opened applications for a proof of concept for a CBDC wallet, while the Kazakhstan central bank has recommended the introduction of an in-house CBDC as early as 2023 with a phased implementation over three years.

The Reserve Bank of Australia (RBA) recently expressed hesitation about its own CBDC plans, with assistant governor Brad Jones warning in a speech on Dec. 8 that a CBDC could displace the Australian dollar and lead to people avoiding commercial banks entirely.