Published: 14th Sep, 2023
Context
Crypto regulation was a key agenda of the G20 summit. While regulations and a framework are yet to be finalised, consensus emerged that a blanket ban was not feasible. This was based on the report formulated by the IMF and the Financial Stability Board endorsed by G20 nations.
Background
- Recently, a paper prepared by the International Monetary Fund (IMF) and the Financial Stability Board (FSB), at the request of the Indian G20 Presidency, has suggested that an outright ban on cryptocurrencies.
- The IMF-FSB Synthesis paper had made a strong case for regulating crypto assets but had noted that a blanket ban may not be an effective tool.
- They also tend to increase the incentives for circumvention due to the inherent borderless nature of crypto- assets, resulting in potentially heightened financial integrity risks, and can also create inefficiencies.
The consensus at New Delhi:
- Under the Finance Track of India’s G-20 presidency, a co-ordinated global approach was discussed for regulating cryptocurrencies and strengthening multilateral development banks’ (MDBs) lending capacity.
- The New Delhi Declaration adopted by the G-20 leaders noted that they “continue to closely monitor the risks of the fast-paced developments in the crypto-asset ecosystem”.
- It emphasized to endorse the Financial Stability Board’s (FSB’s) recommendations for the regulation, supervision and oversight of crypto-assets activities and markets and of global stablecoin arrangements.
- This will help in use of digital public infrastructure like the India Stack to expand financial inclusion around the world.
- However, it does not outright impose any ban on crypto currencies.
Need for regulation:
- To address risks to financial integrity and mitigate criminal and terrorist misuse of the crypto-assets sector, jurisdictions should implement the Financial Action Task Force (FATF) anti-money laundering and counter-terrorist financing (AML/CFT) standards that apply to virtual assets (VAs) and virtual asset service providers (VASPs).
About Cryptocurrencies:
- Cryptocurrencies are digital or virtual currencies that use cryptography for security.
- They exist solely in electronic form and have no physical counterpart like paper money or coins.
- Most cryptocurrencies operate on decentralized networks, typically based on blockchain technology.
- This means they are not controlled by a single central authority, such as a government or central bank.
- Instead, they rely on a distributed ledger maintained by a network of nodes (computers).
Regulation of cryptocurrency
- Unlike the U.S. Dollar or the Euro, there is no central authority that manages and maintains the value of a cryptocurrency.
- Instead, these tasks are broadly distributed among a cryptocurrency’s users via the internet.
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