India has proposed a joint technical paper by the International Monetary Fund (IMF) and Financial Stability Board (FSB) to help in formulating regulatory architecture for Crypto assets. Despite the rapid evolution of the crypto universe, currently, there is no comprehensive global policy framework for crypto assets.

This proposal was made during a panel discussion on “Policy Perspective: Debating the road to policy consensus on crypto assets” held on the sidelines of the G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under India’s Presidency.

“To complement the ongoing dialogue on the need for a policy framework, the Indian Presidency has proposed a joint technical paper by the IMF and the FSB which would synthesise the macroeconomic and regulatory perspectives of crypto-assets,” a statement issued on Saturday post discussion said.

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India has always maintained that crypto assets are borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation on the subject can be effective only with significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards. Currently, policy related to crypto assets and related ecosystem is with the Finance Ministry.

Formulating policy

The statement further said that joint technical would help in the formulation of a coordinated and comprehensive policy approach to crypto assets. The international organisations are expected to present their joint paper during the 4th Finance Ministers and Central Bank Governors meeting in October 2023. The paper is expected to be supplemented by similar such discussion seminars on the sidelines of other G20 meetings. The discussions are further expected to build informed debate within the meetings and lead to formulation of a coordinated and comprehensive policy approach.

Earlier this month, IMF released a paper titled ‘Elements of Effective Policies for Crypto Assets,’ to address questions by Fund members on how to respond to the rise of crypto assets and the associated risks. To frame the discussion, the paper defines and classifies crypto assets based on their underlying features and describes their purported benefits and potential risks. The paper presents a policy framework for crypto assets that aims to achieve key policy objectives such as macroeconomic stability, financial stability, consumer protection, and market and financial integrity.

The framework outlines key elements that are necessary to ensure that these objectives are met. However, such a framework will not fix any underlying crypto design flaws (for instance, the lack of a credible nominal anchor, payments finality, or scalability).

Comprehensive response

According to the statement, India hopes to broaden the G20 discussion on crypto assets beyond financial integrity concerns and capture the macroeconomic implications and widespread crypto adoption in the economy. This will require a data-based and informed approach to the global challenges and opportunities of crypto assets, allowing G20 members to shape a coordinated and comprehensive policy response.

Further, the statement claimed that the discussion helped to initiate a broader dialogue on crypto assets, but also raised several pertinent policy questions that policymakers and regulators need to evaluate closely. “In addition to evaluating the consequences of crypto assets to the broader economy, there is also an existential question on whether crypto assets are indeed the optimal solution for existing challenges in global financial systems,” it said.

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