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Earlier this week, Indian Prime Minister Narendra Modi gave an exclusive and far-reaching interview to local media ahead of the G20 leaders’ summit to be held in New Delhi in early September. As the chair since last December, India is in a unique position to set the agenda of this forum for international economic cooperation.
Among other topics, Modi spoke about the need for a consensus-based global model to regulate cryptoassets. Acknowledging the rapid change in technology in the sector, he said the focus should be on “adoption, democratization and a unified approach” with “rules, regulations and a framework”. […] it doesn’t belong[ing] one country or group of countries”.
He cited the example of the aviation sector, where there are common global rules and regulations that regulate it, and pointed out that all new technologies – not only crypto – need a global framework and regulations.
According to Modi, significant energy has been channeled into global discussions on cryptoassets and India has broadened the conversation beyond financial stability to consider the broader macroeconomic implications of cryptoassets, particularly for emerging markets and developing economies.
Crypto roadmap
India also released a Presidency memo on August 1 that provides inputs to the forthcoming synthesis report of the International Monetary Fund (IMF) and the Financial Stability Board (FSB), which will include a roadmap for a global framework for cryptoassets to be considered by the G20.
The presidency note also highlighted that such a roadmap helps countries implement a minimum policy standard for cryptoassets with a three-fold objective:
- safeguard macroeconomic, financial stability and financial integrity of the nation;
- provide investor and user awareness, education and protection; and
- facilitate the development of basic technology and encourage innovation in the financial sector.
However, while enthusiasts may see Modi’s comments as support for a G20-led global regulatory framework for cryptoassets that would pave the way for mainstream adoption, the real picture is much more complex.
Further regulation required
India’s regulatory regime for cryptoassets remains undefined with high taxation – 30% on gambling-like capital gains and 1% deducted at source for all trades – leading to a sharp drop in trading activity for the cryptoasset sector in India. Similarly, other G20 members such as China, Argentina and Brazil have either imposed a complete ban or severe restrictions on the use of cryptoassets in their countries.
The Presidency Note was also cautious about the goal of the IMF-FSB Synthesis Paper, which will support a coordinated regulatory framework for cryptoassets, while allowing countries to be stricter and implement guidelines that best suit their legal and regulatory context. In other words, the aim is to prevent regulatory arbitrage and minimize risks in line with international standards – which also allow for the banning of crypto-assets along with strict enforcement.
Nonetheless, even if the IMF-FSB Synthesis Paper may not be a panacea for regulatory fragmentation, it is a step in the right direction by focusing global attention on the crypto-asset sector.
While it remains to be seen whether India’s presidency of the G20 will ultimately be a boon or a bane for the sector, it is good to know that discussions about cryptoassets are taking place at the highest levels in the countries driving the development of the global economy.
Regulation APAC Regulators and Government
