The government will frame cryptocurrency regulations after extensive discussions at both the global level and with domestic stakeholders, Economic Affairs Secretary Ajay Seth told CNBC-TV18. He also said that what should be India’s position will be decided in the coming months.
“Based on the consensus which we have been able to achieve or rather build, we will be considering those recommendations very carefully and decide our own policies and thereafter take further action,” Ajay Seth told CNBC-TV18.
On the RBI’s proposed ban on cryptocurrency, he said, “You are asking a leading question…it is not to be seen in that binary…it’s a framework for assessing the risk that has been put together, what will be the sound policies, so keeping that framework in mind now we will analyse our own position with reference to what globally the leaders have agreed that they will travel it together. So, given those what should be our position will be decided in the coming months.”
He also highlighted the substantial progress made within the G20 membership, particularly by organisations such as the International Monetary Fund (IMF), Financial Stability Board (FSB), Financial Action Task Force (FATF), and the Bank for International Settlements (BIS). These organisations have collectively established a clear and comprehensive understanding of a policy framework for assessing risk related to cryptocurrencies.
Seth also said there has been an endorsement of earlier work done by ministers regarding regulations for stablecoins and unbacked crypto assets. This endorsement includes the formulation of high-level principles and regulations for this asset class.
Ahead of the G20 leaders’ summit, the IMF and the Financial Stability Board (FSB) had last week made a strong case 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.
Meanwhile, according to a PTI report quoting a senior official, if any country wants to have a more stricter regulation, it can frame a more restrictive regulation depending on the risk it sees from cryptos.
“Now 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 told PTI.
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.
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 told PTI.
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 9-15.
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 in its paper had said that its proposed regulation apply 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 also 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.
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