Last week, perhaps the cryptocurrency market in a long time heaved a sigh of relief. as at the G20 Summit held in New Delhi, the International Monetary Fund (IMF) and the Financial Stability Board (FSB) decided to advance regulatory recommendations to identify and respond to macroeconomic and financial stability risks associated with crypto-assets. Experts believe that the IMF has highlighted the key elements needed for an appropriate policy response. These recommendations include macroeconomic, legal and financial integrity considerations and implications for monetary and fiscal policies, among others. “The IMF-FSB paper also underscores the importance of unified regulations, broader consultations and a balanced stance. With a growing consensus, India might lead the way in shaping a forward-looking regulatory framework that can not only benefit the Virtual Digital Assets (VDA) sector but also contribute to the nation’s overall economic growth,” Vikram Subburaj, CEO, Giottus, a crypto platform, told FE-TransformX, adding that this approach is essential to promote transparency, enhance security, and encourage responsible usage.
Industry experts believe that this will further encourage the implementation of the Financial Action Task Force (FATF) anti-money laundering and counter-terrorist financing (AML/CFT) standards to address the risks associated with financial integrity. This is expected to eventually reduce the criminal and terrorist-related misuse of the crypto-assets sector. Just after the IMF-FSB synthesis paper was passed, FTX’s administrators recovered about $7 billion in assets, including $3.4 billion of crypto, on September 12, 2023. A court hearing is due on September 13, 2023, Wednesday to consider a plan to begin sales of tokens to help repay creditors, as per insights from Bloomberg. It is believed this use case can be related to the passing of the IMF- FSB synthesis paper.
Interestingly, with recommendations focusing on cash flows, taxation policies, and financial integrity the IMF-FSB paper can provide greater clarity, potentially necessitating licensing for service providers and reporting mechanisms for fraudulent transactions. This approach is expected to reduce data gaps and align cryptocurrencies with the regulation of conventional assets. “ The IMF-FSB paper adhering to FATF’s AML/CFT guidelines applicable to Virtual Assets (VA) and VASPs, jurisdictions can create a robust framework for identifying and preventing illicit financial activities within the realm of cryptocurrencies. This proactive approach not only improves the security of the crypto ecosystem but also contributes to the broader global efforts to combat money laundering and terrorist financing,” Edul Patel, CEO, co-founder, Mudrex, a crypto platform, explained.
From what it is believed that India is leading the dialogues when it comes to regularising crypto-assets. Furthermore, in the IMF-FSB paper, digital asset regulations can be shaped with an agile regulatory philosophy since technology is evolving rapidly and frameworks help in laying the regulatory foundation. “The IMF-FSB synthesis paper can also provide a global framework of recommendations and standards which adequately guides regulators’ policy actions to address and mitigate risks pertaining to financial stability, financial integrity, market integrity and investor protection, among others, associated with digital assets,” Sharat Chandra, co-founder, India Blockchain Forum, a blockchain and Web3.0 -based organisation, said.
The crypto-based stolen funds rose seven percent year-on-year. Also, the share of all cryptocurrency activity associated with illicit activity has risen for the first time since 2019, from 0.12% in 2021 to 0.24% in 2022, as per insights from Chainanalysis, a market research platform. Experts believe with the legal and financial impact presented in the IMF-FSB synthesis paper, these numbers could be reduced in the future. “The IMF-FSB has published the SynthesisPaper on Crypto ahead of the G20 discussions. The paper is a testimony to Inda’s leadership in driving a global consensus on crypto regulations and provides a clear policy roadmap for all countries to adopt. It provides valuable insights into investor protection, cybersecurity, and AML/CTF measures,” Ashish Singhal, co-founder, CEO, CoinSwitch, a cryptocurrency exchange company, explained.
Furthermore, along with cryptocurrency, other digital assets such as Blockchain and Web3.0 technologies have the potential to transform the lives of people. India is believed to have the potential to be a leader in this space. “ The IMF-FSB synthesis paper can create a delicate balance that needs to be struck between the opportunities offered by the space and the potential risks it may pose. Accordingly, the move to the adoption of a principle-based approach that promotes innovation, accounts for the dynamic nature of the space, remains tech-neutral, and focuses on protecting Web3.0 users is a good step,” Dilip Chenoy, Chairman, Bharat Web3 Association, an industry association of Web3.0 technology companies, concluded.
