India is hosting the G20 summit this year, and there is a lot on the list of agendas. The one to recently grab everyone’s attention is cryptocurrencies. There is a possibility that a lot of decisions will be taken, or at least hints will be spilled, by the time the summit concludes. India, for one, has rooted three major concerns pertaining to cryptos.
These include protection & education of investors, risk factors at the macroeconomic level & financial stability, and barriers to innovation in technology. A clear sign is that not every region may be equipped with machines to boost their network for the digital economy. Not that India is one of them, but the concern of the entire region has to be put forward. Simply put, something cannot be advanced unless all the members and countries are on the same page.
All the concerns stated above are expected to be included in the Presidency note. It will then be taken up in Delhi during the Leadership summit.
Another aspect of technological innovation is that development, in any form, should not be at the cost of limiting the capabilities of technology that can otherwise lead to major developments. A similar tone has been echoed by a senior member of the Finance Ministry. The IMF-FSB paper published will be circulated among the members with these details included.
Meanwhile, a summarized note of the Outcome Document & Chair’s note has been made public. It states that the situation will be closely monitored to examine the risks involved in the fast-paced industry. They have endorsed high-level recommendations that were tabled by FSB, short for Financial Stability Board. Recommendations relate to supervision, regulation, and overseeing activities plus markets.
When released, the IMF-FSB Synthesis Paper will show a roadmap to support the regulatory framework and comprehensive policies. It will, most importantly, take into consideration the risk factor for EMDEs, that is, emerging markets & developing economies.
The IMF has already submitted its paper. FSB did the same on Monday. The IMF has presented a framework of nine elements that members can consider to come up with a coordinated policy response. They are majorly centered around the idea that cryptocurrencies should not be given the legal status of a currency or a tender. Another element type is to monitor the capital flow into and from the volatile crypto market.
Supervision and enforcement of regulations, per the framework by the IMF, can be effectively achieved by having domestic agencies also monitor activities on top of international collective arrangements.
FSB framework, on the other hand, is based on the idea of the same activity, same risk, same regulation. The proposal is to subject them to regulations that are comprehensive and consistent in proportion to the risk that they pose to the community.
Nirmala Sitharam, the Union Finance Minister of India, has said that the need is to prioritize the macro-financial implications of digital assets along with the stability of traditional finances.