Crypto problem needs immediate attention, says FM Sitharaman

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Union Finance Minister Nirmala Sitharaman delivers the keynote address at Indias Digital Public Infrastructure – Stacking Up the Benefits, in Washington DC on Friday. | Photo credit: ANI

Issues with crypto assets need immediate attention and the G20 response must ensure they do not lose any potential advantage while protecting economies from harm, said Union Finance Minister Nirmala Sitharaman.

Ms Sitharaman participated in a brainstorming session on the “macro-financial implications of crypto assets” with G20 finance ministers and central bank governors at IMF headquarters here on April 14. India currently holds the annual rotating presidency of the G20 countries.

Issues related to cryptography have become a major point of discussion among G20 countries and there is unanimity among member countries on the urgency of regulating this sector. The brainstorming session brought together world experts on this issue.

In her remarks, Ms Sitharaman said the G20 recognizes the work of the International Monetary Fund (IMF) and the Financial Stability Board (FSB) in highlighting key elements of the policy and regulatory framework.

She also said that a summary document, which would incorporate the macroeconomic and regulatory outlook for crypto assets, is needed.

Also Read:India to Seek Harmonization of Crypto Regulation in G-20 Funding Talks

The Minister noted that there was a consensus among G20 members to have a globally coordinated policy response on crypto assets that takes into consideration all risks, including those specific to emerging markets and developing economies.

Earlier this week, Sitharaman said India’s G20 Presidency aims to develop a common framework for all countries to address the risks associated with cryptocurrencies following the recent shocks seen in the crypto market.

FTX’s bankruptcy episode last year and its spat with Binance triggered a huge sell-off in the market and reduced liquidity. This event made the world aware of the vulnerability of this asset class as they have no underlying value.

“Cryptocurrencies are a very important part of the discussion under the #G20India presidency, given so many crashes and shocks in cryptocurrencies. We are looking to develop a common framework for all countries to deal with this question,” she said in a chat to Peterson. Institute of International Economics here.

According to the President’s summary released after the two-day meeting of Finance Ministers and Central Bank Governors (FMCBG) held in February, the grouping will look forward to the IMF-FSB position paper on crypto assets.

“I’m happy to say one thing: it’s almost clear that anything outside of the central bank is not a currency. And that’s a position that India has taken for a very long time and we’re happy that such a position of India is now also recognized by so many different members. People recognize that the technology is very useful for fintech,” she had said after the conclusion of the FMCBG.

In addition, in July, the FSB document on the regulation of crypto assets will be tabled so that it can be discussed at the next meeting of finance ministers and central bank governors.

The International Monetary Fund-Financial Stability Board (IMF-FSB) position paper will be submitted in September, she added.

Despite the rapidly changing world of crypto, there is no comprehensive global policy framework for crypto assets. Given concerns over greater interconnection between crypto assets and the traditional financial sector, as well as the complexity and volatility of crypto assets, policymakers are calling for stricter regulation.

Global standards bodies, such as the Financial Action Task Force (FATF), Financial Stability Board (FSB), Committee on Payments and Market Infrastructures (CPMI), International Organization of Securities Commissions ( IOSCO) and the Basel Committee on Banking Supervision (BCBS), coordinated the regulatory agenda while working within their respective institutional mandates.

India hopes to expand the G20 discussion on crypto assets beyond financial integrity concerns and grasp the macroeconomic implications and widespread adoption of crypto in the economy.

This will require a data-driven and informed approach to global crypto asset challenges and opportunities, enabling G20 members to shape a coordinated and comprehensive policy response.

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