Amidst turmoil in the cryptocurrency market, India is working with the Financial Stability Board (FSB) so that a consensus on a roadmap for regulating virtual assets could be agreed at during India’s G-20 presidency itself, Economic Affairs Secretary Ajay Seth said on Thursday.
India as assumed G-20 presidency for 2023. The G20 is a premier forum for international economic cooperation that plays an important role in global economic governance.
In an interview to PTI, Seth said that an IMF paper on crypto assets was discussed among emerging economies on January 15 and 16 in Delhi.
“We had a one-and-a-half-day workshop. Thereafter, they are drafting a paper for a seminar, which will be conducted on the sidelines of G20 Finance Ministers and Central Bank Governors meeting in Bengaluru that is scheduled on February 23,” he said.
That seminar is intended at arriving at a policy consensus on crypto assets, he said.
At the same time, he said, “We are also working with the FSB and the idea is that during India’s presidency at least the policy stance to crypto assets, as well as the roadmap for regulation, is broadly agreed upon among the G-20 members.” Finance minister Nirmala Sitharaman on various occasions had said that India will press for collective efforts to deal with the spillovers of happenings in advanced economies as well as global regulation of crypto assets to check terror funding under its G20 presidency.
The minister outlined eight areas, including reforms in multilateral institutions and food and energy security, for discussion under its G20 presidency which has begun on December 1.
The recent collapse of the crypto exchange FTX and the ensuing sell-off in the crypto markets have placed a spotlight on the vulnerabilities in the crypto ecosystem.
Crypto assets are self-referential instruments and do not strictly pass the test of being a financial asset because they have no intrinsic cash flows attached to them.
US regulators have disqualified Bitcoin, Ether and various other crypto assets as securities.
A rare joint statement by the US Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) on January 3, 2023, highlighted their concerns about crypto asset risks to the banking system, the recent Economic Survey had said.
The geographically pervasive nature of the crypto ecosystem necessitates a common approach to the regulation of these volatile instruments, and the global response to cryptos is evolving, it had said.
Observing that crypto assets are new forms of digital assets implemented using cryptographic techniques, the survey had said its market has been very volatile, with its total valuation swinging from almost USD 3 trillion in November 2021 to less than USD 1 trillion in January 2023.
The volatility of the crypto asset ecosystem has brought to the forefront their fragile backing and governance problems, as well as the increasing complexity and non-transparency, it had said.
With related financial stability risks rising, the issue of crypto asset regulation has recently moved up the policy agenda of many nations. International fora like OECD and G20 are discussing a globally coordinated approach to regulating crypto assets, it noted.
Monitoring and regulating cryptocurrencies have been tricky, and regulators across the globe find it challenging to keep track of the new and emerging issues in the fast-moving uncharted field, it said.