As cryptocurrencies gain traction across the world, governments are trying to keep up with the growing adoption of digital assets. India has a large population of crypto investors and users. Not to mention, there are even a few retailers that accept payments in cryptocurrency.
However, the finance minister, Nirmala Sitharaman, is concerned that there is a lack of regulation surrounding the crypto market. Moreover, many of the crypto exchanges operating in India are doing so under minimal regulations.
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On February 11, the finance minister reported that cryptocurrency regulation will be a part of the discussion at the G20 meetings. This comes after she commented that deciding on crypto policy and regulation should be a collective effort.
India’s Finance Minister Urges Countries to Design a Single SOP
In her statement, the finance minister elaborated that cryptocurrency transactions are mainly based on the use of technology with little human interaction. She addressed all the nations at the summit and explained that a single country can’t frame a regulatory policy for crypto assets on its own.
Therefore, she proposed that all countries work together and design a single Standard Operating Procedure that will be effective. While speaking to reporters, she mentioned that the G20 meetings will discuss the future of crypto regulation. She also told them to add her statement to the Reserve Bank of India’s board.
This year, India is the president of the G20 summit, which is a global forum to discuss international economic cooperation. Discussions at the meetings play a crucial role in navigating global economic governance. There have been many events where Sitharaman expressed that India will channel a collective effort to regulate crypto assets.
Concerns That Cryptocurrency is Used to Fund Terrorism
She expressed that their main concern is the use of digital currencies to fund terrorism and launder money. The finance minister discussed either key areas such as reform in food and energy security, as well as multilateral institutions. All these topics were set to be discussed at the meetings.
To make matters worse, the latest scandals concerning crypto companies focused people’s attention on the market’s vulnerabilities. One example is the collapse and bankruptcy of the FTX exchange, along with the resulting sell-off.
According to most financial experts, digital assets like cryptocurrencies are self-referential instruments. Hence, they don’t have any cash flows attached to give them value. Because they don’t fulfill these basic criteria, cryptocurrencies aren’t declared financial assets.
At the same time, regulators in the US, such as the Securities and Exchange Commission, have set up specific criteria. Consequently, they disqualified cryptocurrencies like Bitcoin and Ethereum from being labeled as securities.
Cryptoassets Pose a Risk to the US Banking System
In the US, the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Federal Reserve made a joint statement on the subject. In January, the three institutions expressed their concerns about the risks that cryptocurrencies pose to the country’s banking system.
Because cryptocurrencies aren’t limited to a specific geographical area, it creates the need for a consistent regulatory approach. The survey also mentions that the crypto market is highly volatile, with the total valuation going from $3 Trillion in late 2021 to less than $1 Trillion in January of 2023.
Because these assets are so volatile, it has exposed how fragile their systems of governance are. Similarly, there’s a growing concern about the lack of transparency. As financial stability risks increase, the topic of cryptocurrency regulation has become a higher priority for many countries. It’s why G20 is attempting to design a globally coordinated approach toward the regulation of digital assets.
It’s tricky to monitor and regulate cryptocurrencies, and it’s why regulators have a hard time tracking down emerging issues. Currently, the cryptocurrency space is largely uncharted by government organizations. Hence, it’s important to bring in experts who understand the industry to design policy in accordance with the market’s nature.