IMF, FSB to flesh out crypto regulation in the wake of India’s push at G20

Finance Minister Sitharaman has pitched for a coordinated regulatory mechanism for such assets, a move broadly backed by U.S. Treasury Secretary Yellen; RBI has sought an outright ban on crypto currencies

Updated - February 26, 2023 05:13 pm IST

Published - February 25, 2023 08:49 pm IST - New Delhi

 Union Finance Minister Nirmala Sitharaman addresses the Presidential press conference on the first G-20 Finance Ministers and Central Bank Governors (FMCBG) meeting in Bengaluru.

Union Finance Minister Nirmala Sitharaman addresses the Presidential press conference on the first G-20 Finance Ministers and Central Bank Governors (FMCBG) meeting in Bengaluru. | Photo Credit: ANI

The International Monetary Fund (IMF) and the Financial Stability Board (FSB) are set to formulate a technical paper in a bid to attain a coordinated global approach for the regulation of crypto assets as proposed by the Indian Presidency of the G20. The paper will be presented for consideration at the next meeting of G20 Finance Ministers and Central Bank Governors scheduled in October.

While the Reserve Bank of India has been pitching for an outright ban on the use of crypto currencies and assets, Finance Minister Nirmala Sitharaman has made the case for a coordinated regulatory mechanism for such assets rather than individual countries adopting different stances. The idea had found backing from U.S. Treasury Secretary Janet Yellen, who also mooted international cooperation to set high regulatory standards for crypto assets and steps to reduce the cost of cross-border payments.  

To inform policymakers on the broader macroeconomic and financial stability implications of crypto assets, the Indian Presidency had requested the IMF to prepare a discussion paper that was discussed at a seminar titled “Policy Perspectives: Debating the Road to Policy Consensus on Crypto Assets” at the 2nd G20 Finance and Central Bank Deputies meeting in Bengaluru on Friday. 

The discussion paper presented by the division chief in the IMF’s Monetary and Capital Markets Department, Tommaso Mancini-Griffoli, underlined the the consequences of crypto adoption on the internal and external stability of a country’s economy as well as on the structure of its financial system, according to an official statement. 

“Mr. Mancini-Griffoli underlined that the purported benefits of crypto assets include cheaper and faster cross border payments, more integrated financial markets, and increased financial inclusion, but these are yet to be realised. He further added that problems with interoperability, safety and efficiency cannot be guaranteed by the private sector and critical digital infrastructure/platforms for ledgers should be viewed as a public good,” the Finance Ministry said. 

The IMF official also flagged the global information gaps pertaining to the crypto asset universe and the need to build a deeper understanding of the interlinkages, opportunities and risks pertaining to crypto assets under the aegis of the G20. Among the broad themes discussed at the seminar was the need for a common taxonomy and a systematic classification of the crypto asset universe, macroeconomic policy questions that needed to be evaluated further, and financial stability issues as well as regulatory responses.  

There was a consensus among participants that going beyond the consequences of crypto assets to the broader economy, there was an existential question on whether crypto assets were indeed the optimal solution for existing challenges in global financial systems, the Ministry said.  

“In their entirety, the IMF’s discussion paper, the policy seminar and the joint IMF-FSB paper are expected to integrate the policy questions pertaining to macro-financial and regulatory perspectives of crypto assets and facilitate a global consensus on a well-coordinated and comprehensive policy approach to crypto assets,” the Finance Ministry added.  

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