India has stopped accepting crypto. What can it do to leverage its G-20 power?
India now has the chance to influence global crypto policy thanks to a unique circumstance: its G20 chair. As the industrialized world works to determine the future of money, its term, which started in December, puts the nation in the driver’s seat. The election comes after India imposed high cryptocurrency taxes on February 1, 2022, which were denounced by local cryptocurrency businesses. Between February, when the tariffs were announced, and October 2022, when the new levies were put into effect, Indians transferred more than $3.8 billion in trading volume from domestic to international crypto exchanges, according to the Esya Centre, a technology policy think tank located in New Delhi. There are several potential outcomes for the Indian cryptocurrency market and the country’s regulatory framework. What India does while holding the G-20 presidency could offer some guidance.
The G-20’s Finance Track will host discussions on cryptocurrencies. The “Financial Sector Issues” working group now includes cryptocurrency. Discussions in this working group are the only ones that engage G-20 finance and central bank deputy representatives directly, demonstrating the importance that has been placed on them. The globe has so far followed the “complete” FSB international crypto guidelines. Multilateral talks have been facilitated through its discussion papers. But by giving the IMF a larger role in crypto discussions for the time of the country’s presidency, India made a significant adjustment. Deliberations will center on divisive themes like crypto-asset risk assessments while India holds the presidency. Officials are optimistic that a consensus position can be reached by September, when India will host the G-20 Summit in New Delhi, under the direction of the IMF.
The Indian central bank’s stance that cryptocurrencies should be outlawed hasn’t changed in the interim. Global cooperation is necessary, according to the government’s finance ministry, for a regulatory framework for cryptocurrencies. No jurisdiction’s individual crypto legislation will be successful without that collaboration. Another person acquainted with the thinking of both the government and the central bank stated, “The finance ministry and government have to think about the political economy while the central bank looks at the economy.” Both parties want to prevent what they see as the systemic risk of a parallel economy, one that is unregulated by the government and which crypto would promote. This is why the government has refrained from outright banning cryptocurrencies in favor of imposing high taxes, despite the Indian central bank’s repeated calls for such a ban.
In India, the ruling class has changed its perspective on cryptocurrencies. Opposition leaders have publicly criticized the government for enacting high taxes. But in private, the government has criticized the cryptocurrency industry for not doing enough to reduce the risks connected to the sector, such as terrorism financing, as members of a parliamentary committee on finances entrusted with protecting India’s investors. India is being forced to clarify its position on cryptocurrency as a result of holding the G-20 chair. Two recent occurrences have brought this to light.
The first was a focus group meeting that took place behind closed doors with representatives of more than ten emerging market economies earlier in the month in New Delhi. At that meeting, it was decided that crypto assets are “risky” and not “worth it.” This is supposed to represent the Indian Central Bank’s perspective. A person with knowledge of the conversations said that the IMF is anticipated to include the views on cryptocurrency in a forthcoming discussion paper, possibly suggesting to replace the FSB’s framework for the G-20 negotiations. The second was a conversation that took place at the National Institute of Public Finance and Policy (NIPFP), a free-standing research organization with headquarters in New Delhi. In terms of bringing policy think tanks and business leaders together, it was a first. The administration was curious about the most recent advancements in crypto. The outcomes of this meeting were confirmed by three distinct individuals.
India is in favor of introducing its domestic central bank digital currency by the end of 2023, despite being wary of cryptocurrencies. Last year, India began testing wholesale and retail CBDC. The public and private sectors are the target audience for the retail pilot. Only financial institutions are eligible for the wholesale pilot program. By the end of 2023, India hopes to introduce its own central bank digital currency nationwide. In a nutshell, the retail pilot has been the focus. And a lot could occur in terms of Indian cryptocurrency legislation and development in the months to come. The way the country runs its G-20 leadership could serve as a model.