G20 New Delhi declaration set to give India's crypto regulation a fillip

India is expected to hold wider discussions on the regulation of crypto assets after the G20 Leaders’ Declaration welcomed the synthesis note by the International Monetary Fund (IMF) and Financial Stability Board (FSB) on crypto assets, said department of economic affairs (DEA) secretary Ajay Seth on Sunday. 

“Since there is consensus at the multilateral level on crypto currency and endorsement from the leaders, we will now study it and make our policy accordingly,” Seth said. 

India would, however, follow the global consensus on crypto assets, which goes beyond G20.

“One country alone, whichever path it takes, would not be effective. Whatever we do, we have to refer to the global community. The discussion will happen now in our system. It is not an easy one,” a government official said. 

The IMF-FSB synthesis paper — while laying out the macroeconomic risks of crypto assets — seeks to establish “a minimum baseline that jurisdictions should meet. It aims to address the issues common across the majority of jurisdictions.”

“If any country wants to have a stricter regulation, it can frame a more restrictive one depending on the risk it sees from cryptos. If all countries agree on the same regulation, there will be no arbitrage, the official said,” the government official added.

The synthesis paper had said that blanket bans, which make crypto assets illegal, can be costly and technically demanding to enforce.

A decision to ban is not an “easy option” the report said, while adding that temporary restrictions should not substitute for robust macroeconomic policies.

The IMF-FSB recommendations, along with the roadmap for implementation would be discussed at the fourth meeting of G20 finance ministers and central bank governors scheduled to take place in Marrakech, Morocco. That is, on the sidelines of the 2023 annual meetings of World Bank and IMF during October 9-15.

Several leaders and government officials talked about the issues around crypto assets and there was unanimous acceptance of the IMF-FSB synthesis paper. 

“We expect a lot of discussion to happen on how to implement it faster and in a comprehensive manner. We have a good framework to decide our own way forward. The foundation is ready, and beyond that, how much do we want to go. It is for us to decide in the coming months and then take a call,” the official said. 

Former DEA secretary Subash Garg said that India has clearly abandoned the idea of banning crypto, at least in public expression.

“Implicitly, India could disallow banking system access instead of any explicit ban. It can expand the indirect tax regime. India can also always say that the regulations are a matter of debate globally,” Garg said. 

While stating that ban is not an easy option, the synthesis paper — while laying out the risks associated with crypto assets — also recommended that they should not be made official currency or legal tender. Also, it said central banks should avoid holding crypto assets in their official reserve as they pose risk to monetary and global financial stability.