Checkout Budget Highlights 2023Finance ministry officials and central bankers from G20 countries are seemingly in agreement when it comes to the regulation of crypto assets, with a complete ban on them also on the table.
On February 23, a day before the first meeting of G20 finance ministers and central bank governors in Bengaluru, a deputy-level closed-door session was held on crypto assets.
A statement by the Indian government, issued on February 25, said the discussion included talks on the need for systematic classification of crypto assets and financial stability issues and regulatory responses, among other subjects.
India is looking to build an international consensus on the regulation of these assets, with the argument being that only a global collaboration would be effective given the cross-border scale, scope, and challenges presented by crypto.
Speaking to reporters on the sidelines of the G20 meetings here in Bengaluru, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said crypto assets were not money and could not be legal tender.
"There has to be very strong push for regulation (of crypto). And…if regulation fails, if you're slow to do it, then we should not take off the table or banning those assets because they may create financial stability risks," Georgieva said on February 25.
Georgieva's comments come a day after the IMF's Executive Board said that its directors "broadly welcomed" a framework proposed by a staff paper titled 'Policy Elements of Effective Policies for Crypto Assets'.
"Authorities may prohibit the listing of certain types of crypto assets, such as those that use technology to completely mask any form of user identification," the paper said.
According to a source aware of the G20 discussions, the last one year has led to the recognition from global authorities that the crypto space needs to be regulated.
"I think it is now agreed by almost everyone that regulation also includes the choice of complete prohibition. That's one way of regulating crypto," the source said, adding that a regulatory framework could be flexible and country-specific.
The aforementioned IMF paper also argued that any policies must be flexible for them to be effective.
"Crypto assets come in many forms and will likely continue to evolve, including in response to policy actions. There are major data limitations, with business models still being developed. Therefore, effective policies need to be flexible and able to adapt to new developments," the paper said.
As part of this week's G20 meetings, India has proposed a joint technical paper by the IMF and Switzerland-based Financial Stability Board. This paper, as per a government statement, would "synthesise the macroeconomic and regulatory perspectives of crypto-assets" to help formulate policies for the crypto space.
The paper is expected to be ready by October.