The writing is on the wall: individual nations attempting unilateral bans on the crypto industry would be counterproductive. Kristalina Georgieva, the International Monetary Fund’s Managing Director, reportedly drew an analogy between Crypto and water. She suggested that efforts to ban it would be futile as it would inevitably find its way, emphasising the need for a collective approach
Great Expectations – This was the prevailing sentiment when India assumed the presidency of the G20. India had already bolstered its international reputation with its vaccine diplomacy, by playing a constructive role in climate change discussions, and by being the fastest-growing economy. For its presidency, India adopted the ancient Sanskrit shloka “Vasudhaiva Kutumbakam,” signifying “One Earth, One Family, One Future,” as its theme.
This emphasises sustainable, responsible choices for both individuals and governments, aiming for a just and equitable world. With G20 summits crisscrossing India, transformative agendas, and championing the concerns of the often-overlooked Global South, India’s presidency has been memorable. The focus has consistently been on unified global action, and Crypto regulation emerged as a prime area for collaborative effort.
The writing is on the wall: individual nations attempting unilateral bans on the crypto industry would be counterproductive. Kristalina Georgieva, the International Monetary Fund’s Managing Director, reportedly drew an analogy between Crypto and water. She suggested that efforts to ban it would be futile as it would inevitably find its way, emphasising the need for a collective approach.
India’s proactive role was evident during the third G20 Finance Ministers and Central Bank Governors (FMCBG) meeting held in Gandhinagar, Gujarat. The focus was on a unified framework for crypto assets. The input paper India presented to the G20 delineated three core principles. Firstly, it emphasised the mitigation of macroeconomic and financial stability risks that digital assets might usher in. Secondly, it accentuated the importance of investor protection and the necessity for comprehensive education in this domain. Lastly, it underscored the commitment to preserving technological innovation while ensuring Cryptos are regulated effectively.
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View Details »Prima facie, it looks like India is aiming for a regulatory environment that is neither too strict nor too lenient – the Goldilocks zone of regulation. The Goldilocks zone of regulation in the case of Crypto is an environment that is neither too restrictive nor too permissive. Overly restrictive regulation could stifle innovation and hinder the growth of the industry, while overly permissive regulation could lead to increased fraud, money laundering, and other criminal activities.
To achieve the Goldilocks zone of regulation, it is crucial to strike a delicate balance between the risks and benefits of different regulatory approaches. It also requires a coordinated effort among international regulatory bodies to ensure that regulations are consistent across borders and do not create unintended consequences.
India’s stance was clear on the potential risks associated with cryptos, particularly money laundering and terrorist financing. This proactive approach has resonated with governments worldwide, prompting them to seek stringent regulatory measures to counter potential illicit undertakings.
Among the notable outcomes of the G20 discussions was the unanimous call by member countries for the expedited implementation of the Crypto-Asset Reporting Framework (CARF). Slated for initiation by 2027. CARF aims to bolster transparency and instill accountability in the Crypto market. Concurrently, the International Monetary Fund (IMF) and the Financial Stability Board (FSB) are analysing the macro-financial implications of Crypto assets. Their ongoing collaborative effort, the Synthesis Paper, is geared towards crafting a holistic policy and regulatory framework. This endeavour is especially pertinent, considering the unique risks posed to emerging markets and developing economies (EMDEs). In addition to the formal G20 FMCBG conference, a roundtable discussion titled “Policy Dialogues on Crypto Assets” allowed for an open and candid discussion of critical Crypto-related issues.
As India heads towards the conclusion of its presidency, the G20 will formalise global Crypto rules. The G20 nations are planning to enact perhaps the first global Crypto laws ahead of the Leaders’ Summit in September, with the cooperation of the FSB and the IMF.
“With great power comes great responsibility” – a principle that India has embodied in its journey through the intricate maze of Crypto regulations. It has travelled a long and winding road, striking a commendable balance between practicality and caution. By demonstrating restraint and thoughtful action in its approach to Crypto, India sets an example for responsible governance in the face of emerging digital innovations.
(The author is Mr. Rajagopal Menon, Vice President, WazirX)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)