India, the current president of the G20, has supported the Financial Stability Board (FSB) and other international bodies’ recommendations for a global crypto framework published in July 2023. The country also emphasised the need to deal with the risks of digital assets for developing economies and to extend the regulatory approach beyond the G20 scope.
On August 1 2023, India’s presidency released a note for input in a roadmap on a global framework for crypto. The note was published on the page of G20, an intergovernmental forum for the 20 largest economies in the world. The document concurs with the guideline written by the FSB, the Financial Action Task Force (FATF) and International Monetary Fund (IMF).
Details on the Guidelines
According to the report, the note suggests some additions, including an emphasis on developing countries. However, as the IMF pays attention to developing economies’ specifics in its potential guidelines for crypto, India urges the FSB to implement them as well.
The note also calls for outreach to all jurisdictions to generate awareness of risks starting from countries with higher crypto adoption and extending the future regulatory approach to the digital economy beyond the scope of G20. It was also revealed that the so-called Synthesis Paper by the IMF and FSB is due to be released at the end of August and provides a broad roadmap to be considered by the G20, according to experts at Bitcoin Decode..
India’s Support of FSB Guidelines for Crypto
In July, the FSB approved a global crypto framework for regulating stablecoins and other crypto assets based on existing principles and standards. The guidelines covered disclosure, supervision, cross-border cooperation and risk management. The FSB emphasised that crypto platforms must segregate clients’ digital assets from their funds and separate functions to prevent conflict of interest with regulators to ensure tight cross-border cooperation and oversight. Local regulators have been urged by the international body to make sure that no activities may frustrate the identification of h responsible entities or affiliated entities pointed to decentralised finance (DeFi) protocols.
One of the high-level recommendations noted, that “Authorities should have access to the data as necessary and appropriate to fulfil their regulatory, supervisory and oversight mandates.” The FSB mentioned that any stablecoin issuer should have one or more identifiable and responsible legal entities or individuals it calls a governance body. It said that issuers must hold reserve assets in 1:1 minimal proportion unless the issuer is subject to adequate requirements equivalent to commercial bank standards.
Moreover, the guidelines also included an obligation for stablecoin issuers to obtain a national licence to operate in each jurisdiction. The guidelines stated, “Authorities should not permit the operation of a GSC arrangement in their jurisdiction unless the GSC arrangement meets all of their jurisdiction’s regulatory, supervisory and oversight requirements including affirmative approval.”
The FSB intends to review the state of implementing its recommendations worldwide by the end of 2025. A standard set of rules for combating money laundering and terrorist financing risks associated with crypto was provided by the FATF guidelines in June. The rules required countries to implement the travel law, which obliges crypto service providers to share user data when transferring funds. The IMF guidelines published this month will be expected to provide a synthesis paper offering a broad roadmap for crypto regulation, considering the views of various stakeholders and jurisdictions.
India’s Suggestions Beyond G20 Scope
While supporting the international guidelines for crypto, India suggested some additions. Amongst them is an emphasis on developing countries, which may face challenges and vulnerabilities due to crypto. The document mentioned that developing economies may need the capacity and resources to implement effective regulation and supervision of cryptocurrencies.
They may need more access to reliable information and data on crypto activities and risks; however, they may be exposed to illicit use of crypto, such as tax evasion, cybercrime and money laundering. That is why India urged the FSB to incorporate the specificities of developing economies in its guidelines and to provide technical assistance and capacity building to these countries.
The document mentioned that crypto is only one aspect of the broader digital transformation reshaping various sectors and industries. The digital economy posed new challenges and opportunities for regulators, policymakers and supervisors and required greater coordination and cooperation among different stakeholders and authorities at the national and international levels. India proposed that the G20 should consider developing a comprehensive digital economy framework covering issues including digital taxation, digital identity, digital inclusion, digital innovation and data governance. In September 2023, the FSB and IMF will deliver a joint report on the existing policies and regulatory issues to the G20.
The Synthesis Paper by the FBS and IMF is due to be released at the end of this month and provides a broad roadmap to be considered by the G20. India’s input for the G20 crypto roadmap may reflect its active engagement and interest in shaping the global agenda on crypto regulation. The country has been exploring various aspects of crypto. However, it remains to be seen how it will reconcile its support for international guidelines with its legislative proposals.