India to wait for further international discussions on cryptocurrencies before framing regulations

Comprehensive domestic regulations on cryptocurrencies may take a while as the government is expected to wait for further discussions on the international level on these virtual assets at the G20 and an immediate ban may be unlikely.

“The G20 Leaders have welcomed the IMF-FSB Synthesis paper. We expect a lot more discussion on how to implement the regulations faster. The foundation is ready and then we can take it forward,” said a top government official.

He further noted that the discussions will have to be taken beyond the G20 to other countries and then there would have to be internal discussions in India as well.

“We don’t see it as a binary of ban versus regulations. There are a set of recommendations. If any country wants to ban it, it can. But if the rest of the countries don’t ban it, then that ban will not work. Discussions would now place take on cryptocurrency regulations and how far to take it.. Then we gradually decide on our own system. The discussion will happen now in our system. It is not an easy one,” said the official source.

In the Delhi declaration, the G20 said it continues to closely monitor the risks of the fast-paced developments in the crypto asset ecosystem. “We endorse the Financial Stability Board’s (FSB’s) high-level recommendations for the regulation, supervision and oversight of crypto-assets activities and markets and of global stable coin arrangements,” it said.

It 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 the emerging market and developing economies (EMDEs) and ongoing global implementation of FATF standards to address money laundering and terrorism financing risks.

Further discussions are expected at the fourth meeting of the G20 finance ministers and central bank governors when they meet in Marrakech, Morocco, on the sidelines of the 2023 annual meetings of the World Bank and the IMF from October 9-15.

The IMF-FSB Synthesis paper had made a strong case for regulating crypto assets but had noted that a blanket ban may not be an effective tool.

India has made a strong case for a global approach on regulating cryptocurrencies on concerns over money laundering and tax evasion as well as its impact on the financial systems.

The official also highlighted that there are risks associated with cryptocurrencies as the same set of entities 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.