India to decide on crypto regulations after ‘extensive discussions’ globally

Virtually ruling out a ban on assets such as cryptocurrency, a senior official on Sunday (September 10) said India will decide on implementing cryptocurrency regulations after extensive discussions with other countries.

Ahead of the G20 leaders' summit, the International Monetary Fund (IMF) and the Financial Stability Board (FSB) had last week made a strong pitch for a coordinated global policy action to deal with risks posed by cryptocurrencies and said that there should not be any blanket ban. The IMF-FSB recommendations laid out a “roadmap” and suggested “bare minimum” regulations that every country should have on cryptocurrencies.

If any country wants to have a stricter regulation, it can frame a more restrictive regulation depending on the risk it sees from cryptos, the official said. “G20 leaders have endorsed it (FSB recommendations) and now ministers and governments will discuss it and take it forward. We expect a lot of discussion to happen on how to implement it faster, swifter and in a comprehensive manner. We have a good framework to decide our own way forward. The foundation is ready, beyond that how much we want to go it is for us to decide in coming months and then take a call,” the official said.

India has been pressing for a global regulation on cryptocurrencies to tackle tax evasion and round tripping of funds. India's central bank RBI has been asked for a complete ban on cryptocurrencies, like Bitcoin and Ether, saying they are akin to gambling.

Banning cryptocurrencies needs global consensus

The official said it would be difficult for one country to ban cryptocurrencies and globally a consensus has to be reached that all countries follow the “bare minimum” regulation that the IMF-FSB paper has outlined.

“If you want to ban it (cryptocurrency), go ahead and ban it. But if the rest of the countries are not banning it, it will be extremely difficult for one country to ban it. Now that discussion, we have to take up and try to build a consensus on regulation. Then we gradually decide on our own system. The discussion will happen now in our system. It is not an easy one,” the official said.

The fourth meeting of G20 finance ministers and central bank governors is scheduled to take place in Marrakech, Morocco, on the sidelines of the 2023 annual meetings of World Bank and IMF from October 9 to 15.

The official said there are risks associated with cryptocurrencies as there are the same set of entities who act as depository and clearing systems, unlike that in the stock market.

“The purpose of regulation is that the risk is well managed. Any country which feels they have more risk can make their regulation more restrictive,” the official said, adding if all countries agree on the same regulation there will be no arbitrage.

The IMF-FSB Synthesis Paper

The IMF-FSB in its paper had said that its proposed regulation applies the principle of “same activity, same risk, same regulation”, establish a minimum baseline that jurisdictions should meet, and aim to address the set of issues common across majority of jurisdictions.

The New Delhi declaration issued at the end of the first day of G20 leaders' summit had said that the countries will continue to closely monitor the risks of fast-paced developments in the cryptoasset ecosystem.

“We endorse the Financial Stability Board's (FSB's) high-level recommendations for the regulation, supervision and oversight of cryptoassets activities and markets and of global stablecoin arrangements,” it said.

The leaders called for timely implementation of these recommendations in a consistent manner globally to avoid regulatory arbitrage. G20 leaders also welcomed the IMF-FSB Synthesis Paper, including a roadmap, that will support a coordinated and comprehensive policy and regulatory framework taking into account the full range of risks and risks specific to emerging market and developing economies (EMDEs) and the ongoing global implementation of FATF standards to address money laundering and terrorism financing risks.

“Our Finance Ministers and Central Bank Governors will discuss taking forward the roadmap at their meeting in October 2023,” the declaration said.

(With agency inputs)