India Wants G20 To Develop A Global Crypto Framework 

India Wants G20 To Develop A Global Crypto Framework 

The Reserve Bank of India (RBI) says that one of the priorities of India is to work with its G20 partners to develop a global framework for regulating cryptocurrencies. The central bank is calling for a complete ban on unbacked crypto assets, stablecoins and DeFi, while encouraging the use of CBDCs. 

The Reserve Bank of India (RBI) has published its Financial Stability Report (FSR) for December. In the document, the central bank says that designing an “appropriate policy approach” should be the goal for G20 nations to promote responsible innovation and mitigate financial stability risks in the crypto ecosystem. 

One of the priorities of India, who is presiding over the G20 this year, is to develop a global framework to regulate the crypto sector, including the possibility of prohibiting unbacked crypto assets, stablecoins and decentralised finance (DeFi). The RBI highlighted the current turmoil faced by the crypto markets, largely due to the collapse of crypto exchange FTX in November, the Terra/Luna crash in May, and the subsequent bankruptcies of crypto hedge fund Three Arrows Capital (3AC), and lenders BlockFi, Voyager Digital and Celsius Network, have exposed the structural vulnerabilities of cryptocurrencies. 

The FSB report accuses the instruments of falsely claiming to have inflation-hedging benefits as prices of Bitcoin (BTC) and Ethereum (ETH) are at historical lows while inflation continues to run rampant across the world. Moreover, RBI is concerned with the assets becoming more interconnected with traditional financial assets, and diverting investments away from mainstream finance markets, which will have a broader impact on the real economy.

In response, India is calling on global leaders to ensure that their respective jurisdictions possess the necessary powers, tools and resources to regulate, supervise and oversee crypto markets. The country wants lawmakers to develop an extensive governance and risk management framework addressing the financial risk to investors from interconnecting crypto with traditional investment products like equities, and also design an appropriate crypto asset disclosure scheme. 

At a meeting held on December 13 to 15 in Bengaluru between G20 finance and central bank deputies, it was decided that the international body’s main aim is to build a policy consensus to better regulate crypto assets on a global scale. Ajay Seth, India’s economic affairs secretary, said that one of G20’s agenda will be to discuss prioritising the use of central bank digital currencies (CBDC). India is currently testing its e-rupee in the wholesale sector where a select number of state-owned banks are using the digital currency for settlements, meanwhile, in the retail sector, a closed group of merchants and businesses are accepting transactions in the CBDC. 

Gita Gopinath, deputy managing director of the International Monetary Fund (IMF), said that under India’s presidency, the G20 can make progress in the areas of debt management, crypto regulation, and climate mitigation in finance. The deputy is currently in India representing the IMF at the G20 meeting. 

“After the crypto meltdown which we have seen recently, it is clear that we need internationally agreed standards on regulation. Progress on that front being able to accomplish that by 2023 would be a concrete outcome,” said Gita. 

Earlier last year, the Indian government announced a 30% tax levy on crypto gains and a 1% deduction on every cryptocurrency transaction. This affected crypto investors in the country with one of the largest adoption rates in the world. The tax reform was criticised by crypto companies and investors alike, who said such an approach would hinder the industry’s growth in one of the fastest growing economies. 

India’s central bank continues to maintain its anti-crypto stance and is calling for a complete ban on crypto assets. Last week, RBI governor Shaktikanta Das stated that crypto has no “underlying value” and poses a great risk for the financial stability of the global economy. The governor asserts that cryptocurrencies would probably cause the next financial crisis. 

G20 or Group 20, is an international body comprising 19 nations and the European Union, representing 85% of the global GDP. The group meets over the course of a year to discuss major issues affecting the global economy, like financial stability, climate change mitigation and sustainable development. 

Also Check: UK Enacts Crypto Tax Break For Foreign Investors Using Local Exchanges 

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