To complement the ongoing dialogue on the need for a policy framework for cryptos, India has proposed a joint technical paper by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) which would synthesise the macroeconomic and regulatory perspectives of crypto-assets for the G20 Finance Ministers and Central Bank Governors (FMCBG) meeting in October.

A cryptocurrency is a virtual currency that is secured by cryptography. Many cryptocurrencies are decentralized networks based on blockchain technology. This decentralized structure allows them to exist outside the control of governments and central banks. Like many countries, India doesn’t have a regulatory regime for cryptos despite these being covered under the tax net.

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The Indian G20 Presidency in 2023 wants to broaden the G20 discussion on crypto assets beyond financial integrity concerns and capture the macroeconomic implications and widespread crypto adoption in the economy. This will require a data-based and informed approach to the global challenges and opportunities of crypto assets, allowing G20 members to shape a coordinated and comprehensive policy response.

The IMF managing director Kristalina Georgieva on Saturday said banning private cryptos should be an option if regulations fail.

The IMF has put together a comprehensive paper on the macro-financial implications of crypto assets for deliberation by the G20 FMCBG on Friday.

“We have to differentiate between central bank digital currencies that are backed by the state and stablecoins, and crypto assets that are privately issued,” Georgieva said.

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“There has to be a very strong push for regulation… if regulation fails, if you’re slow to do it, then we should not take off the table banning those assets, because they may create financial stability risk,” she said.

At a seminar on cryptos on the sidelines of the G20 FMCBG meeting here, IMF speaker Tommaso Mancini-Griffoli presented the discussion paper highlighting the consequences of crypto adoption on the internal and external stability of a country’s economy as well as on the structure of its financial system.

Mancini-Griffoli underlined that the purported benefits of crypto assets include cheaper and faster cross border payments, more integrated financial markets, and increased financial inclusion, but these are yet to be realised.

The problems with interoperability, safety and efficiency cannot be guaranteed by the private sector and critical digital infrastructure/platforms for ledgers should be viewed as a public good, he said. He also flagged the global information gaps pertaining to the crypto asset universe and the need to build a deeper understanding of the interlinkages, opportunities and risks pertaining to crypto assets under the aegis of the G20.