India to take a call on crypto regulations after wider consultation, indicated no ban

Taking cue from the IMF synthesis paper, India, on Sunday, virtually ruled out banning crypto assets while saying that it will decide on the implementing cryptocurrency regulations after extensive discussions with other countries.

The New Delhi Declaration has welcomed the synthesis paper, prepared by International Monetary Fund (IMF) and Financial Stability Board (FSB), which advocates for comprehensive regulatory and supervisory oversight of crypto-assets. It also pitched for norms for money laundering to check the use of crypto assets by criminals and terrorists. Now, it will be taken up for detailed deliberation during next G20 Finance Minister Central Bank Governor (FMCBG) under India’s Presidency meeting to be held in Maracas (Morocco), next month.

“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,” said a senior Finance Ministry official.

On Saturday, the Declaration reiterated close monitoring of 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 stablecoin arrangements. We ask the FSB and SSBs (standard-setting bodies) to promote the effective and timely implementation of these recommendations in a consistent manner globally to avoid regulatory arbitrage. We welcome the shared FSB and SSBs work plan for crypto assets,” stated the declaration.

In July, the FSB issued a 9-point list of recommendations for crypto asset regulation. It emphasised the need for robust governance frameworks, defining responsibilities, and accountability for issuers and service providers. These norms adhere to the principle of ‘same activity, same risk, same regulation,’ ensuring consistent and comprehensive oversight of crypto asset operations, including stablecoins, in proportion to their associated risks.

Global regulation

India has been pressing for global regulation on crypto regulations to tackle tax evasion and round-tripping of funds. RBI has been asked for a complete ban on cryptocurrencies such as Bitcoin and Ether, saying they are akin to gambling.

The official said it will 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 said.

He also said that there are risks associated with cryptocurrencies as there are the same set of entities that act as depository and clearing systems, unlike those in the stock market. “That has to be separated if you have to have a regulation. The purpose of regulation is that the risk is well managed. Any country who feels they have more risk can make their regulation more restrictive,” the official said, adding if all countries agree on same regulation there will be no arbitrage.