The adoption of crypto roadmap by finance ministers and central bank governors of the G20 nations is a step in the right direction
Published Date – 11:30 PM, Mon – 16 October 23
A coordinated international regulatory mechanism alone can bring order to the volatile and unstable cryptocurrency market. Cryptocurrency is entirely technology-driven and is, at present, beyond the control of the regulatory systems. Any isolated attempt by a single country to control the virtual currency market will be of no use. The recent adoption of the crypto roadmap by finance ministers and central bank governors of the G20 nations to deal with the challenges posed by crypto assets is a step in the right direction. The International Monetary Fund (IMF) and the Financial Stability Board (FSB) — an international body that monitors the global financial system — have recommended that while crypto assets should not become legal tender, they should also not be banned as prohibition is a costly exercise and difficult to enforce. This is a pragmatic approach. The plan to reach out to other nations for regulatory support is also timely in view of the frauds detected in the crypto world, which is not confined to geographical borders. The IMF has called for a coordinated global response to ensure a level playing field, covering all aspects of the crypto ecosystem. The advocacy of global coordination and information-sharing on crypto assets and ensuring compliance with FATF (Financial Action Task Force) standards on crypto assets will help curb scams. Lakhs of investors worldwide are still reeling under the multi-billion-dollar impact of last year’s sudden collapse of FTX, one of the world’s largest cryptocurrency exchanges. Remedial steps are urgently needed.
Crypto firms based in India have been advocating progressive regulations that act as a major fillip for the industry. This ensures that the crypto asset ecosystem operates within a well-defined regulatory framework, promoting stability and investor protection. Issues such as taxation of assets, a bear market and regulatory uncertainties in the past have hit the domestic crypto firms hard. Many have diversified and started other financial services on their platform. The IMF-FSB crypto roadmap includes global coordination and information sharing on crypto assets. It also calls for the implementation of policy frameworks and development of a common framework to address data gaps. As the roadmap gets implemented in the future, crypto companies operating in the country will need to invest in compliance measures to adhere to regulations. This includes investments in resources, technology and personnel. Crypto assets have been around for more than a decade, but it is only now that efforts to regulate them have gained momentum. It is only in the past few years that crypto assets have moved from being niche products in search of a purpose to having a more mainstream presence as speculative investments, hedges against weak currencies and potential payment instruments. The spectacular, if volatile, growth in the market capitalisation of crypto assets and their creep into the regulated financial system have led to increased efforts to regulate them.
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