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India Will Base Global Crypto Framework on IMF and FSB Synthesis Paper

India’s G20 presidency is expected to bring incoming crypto rules to coordinate global regulation  by September.

In establishing a set of international standards for crypto, India has asked the International Monetary Fund (IMF) and the Financial Stability Board (FSB) to jointly prepare a technical paper on crypto assets.

India currently holds the presidency over the Group of 20 (G20), a group of 20 nations comprising the largest economies of the world. Under India’s presidency, the South Asian nation has made it clear that creating global regulatory policy for crypto was a priority during its term.

After two days of talks, the G20 will draw up a comprehensive policy for the coordination of regulating crypto worldwide, and has enlisted the help of the IMF and FSB to present their ideas on approaching crypto assets.

The joint paper by both the IMF and FSB would be presented at the finance ministers and central bank governors meeting in October 2023, the 4th G20 Finance Ministers and Central Bank Governors (FMCBG) Meet, according to the Ministry of Finance.

“First of all we are going through the study process so that there can be informed discussions,” said Indian Finance Minister Nirmala Sitharaman at a press conference

Sitharaman is optimistic for developments, expecting the FSB’s paper in July, with a synthesised version ready by September.

G20 attitudes towards crypto

India’s Central Bank Governor Shaktikanta Das has observed that there was a huge shift in attitudes towards crypto assets over the past year. 

2022 was famous for multiple high-profile crypto collapses and insolvencies, and the fiat finance world became gradually wary over a global crypto contagion. According to Das, there is a general acceptance amongst the G20 Finance Ministers and Central Bank Governors about risks involved in crypto assets.

“There is wide recognition and acceptance of the fact that crypto currency, or asset, or whatever name you call it, is a risk to financial stability, monetary systems and cyber security,” said Das. “There will be a synthesis paper on this whole issue of crypto. That will form the basis to develop an international architecture.”

India’s G20 presidency aims to expand its discussion on crypto, while considering macroeconomic implications and current adoption within the country and worldwide, in order to draft appropriate policy to assess the challenges and opportunities that crypto assets may bring.

The recent G20 meeting has shown that there have been various opinions and approaches in regulating crypto. According to Minister Sitharaman, the Canadian central bank governor wasn’t  so keen on crypto, saying that it should “not be given regulatory seal of approval.”

Last Friday, the IMF presented a paper regarding the macro-financial implications of crypto assets, to be deliberated at the meeting. In the IMF’s presentation, speaker Tommaso Mancini-Griffoli highlighted the consequences of crypto adoption on the stability of a country’s economy and financial system, and outlined a framework of nine policy principles that address issues in legal and regulatory matters, microfinance, and international coordination.  

In a previous meeting, IMF managing director Kristalina Georgieva made the suggestion to Minister Sitharaman that if crypto regulation fails, private crypto assets should be prohibited.  

“We have to differentiate between central bank digital currencies that are backed by the state and stable coins, and crypto assets that are privately issued,” said Georgieva. There has to be a very strong push for regulation… if regulation fails, if you’re slow to do it, then we should not take off the table banning those assets, because they may create financial stability risk.”

Indian Prime Minister Narendra Modi’s government has also taken a similar opinion to Georgieva, with the administration in debates to draft a law to possibly ban crypto within the country. No final decision has been made yet. The Reserve Bank of India also has issues with crypto assets, likening cryptocurrencies to Ponzi schemes and therefore should be banned, but has also yet to take action.

At the sidelines of the G20 meeting, United States Treasury Secretary Janet Yellen stressed that there needs to be a strong regulatory framework for crypto, instead of the IMF’s proposal for an option to outright ban private tokens.

“We haven’t suggested outright banning of crypto activities, but it is critical to put in place a strong regulatory framework,” Yellen said. “We’re working with other governments.”

Towards global policy

According to a statement from India’s Press Information Bureau, talks are still ongoing in order to draft up an informed and comprehensive policy for global crypto regulation.

“To complement the ongoing dialogue on the need for a policy framework, the Indian Presidency has proposed a joint technical paper by the International Monetary Fund (IMF) and the FSB, which would synthesise the macroeconomic and regulatory perspectives of crypto assets,” according to an official statement.

Further, the Ministry added, “The discussions are further expected to build informed debate within the G20 meetings and lead to the formulation of a coordinated and comprehensive policy approach.”

Topics discussed included how to classify crypto and develop a common taxonomy and appropriate systemic classification of all items in the crypto asset class, benefits and risks regarding crypto assets, financial stability, wider macroeconomic policy issues for further evaluation, and how regulatory response should be handled.

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