G20’S Crypto Regulatory Framework

Recently, G-20 countries have agreed to explore a coordinated regulatory framework for crypto assets.

India was previously considering an outright ban on cryptocurrencies due to concerns about their use and advertisements.
Realization that a global consensus is needed for effective regulation has led to a shift away from an outright ban.

The G-20 leaders’ declaration has endorsed recommendations by the Financial Stability Board (FSB) to regulate and supervise crypto assets.
The FSB roadmap includes coordinated regulatory frameworks addressing risks, especially in emerging markets, and concerns related to money laundering and terror financing.
G-20 Finance Ministers and Central Bank Governors will discuss the roadmap’s implementation at a meeting in Marrakesh next month.

The focus is on well-managing risks, and timely and consistent implementation of FSB recommendations globally.
Preventing regulatory arbitrage, where trade shifts to jurisdictions with more relaxed regulations, is a key concern.
India intends to have a conversation with stakeholders to align its system and policies with the FSB recommendations.
The IMF is also contributing to proposals for a comprehensive policy framework for digital money and crypto assets.

Anonymous: Transactions can be conducted without revealing identities, credit scores, or the involvement of banks.
Highly secure: Transaction records are stored in a transparent, tamper-resistant digital ledger accessible to anyone.
Difficult to steal or seize, and can be used globally.
Cost-effective transfers: Some cryptocurrencies enable cheaper and faster value transfers compared to traditional methods.
Not limited to illegal use; price volatility has reduced its attractiveness in the black market.
No physical form: Cryptocurrency exists purely in digital form and is not issued by a central authority.
Governments may work on creating their own cryptocurrency versions.
Decentralized control: Cryptocurrencies typically operate without central authority, using distributed ledger technology like blockchain.
Blockchain technology: A public ledger of encrypted data blocks, forming a transparent and immutable record.
Digital assets are distributed, not copied or transferred, ensuring an immutable record.
Decentralization allows real-time access and transparency to the public.
Transparent ledger preserves document integrity, building trust in the asset.
Blockchain’s security measures and public ledger make it applicable to various sectors.

2009: Bitcoin, the first cryptocurrency, launched by Satoshi Nakamoto.
2018: RBI (Reserve Bank of India) banned banks and regulated entities from supporting crypto transactions.
2019: An inter-ministerial committee recommended banning all private cryptocurrencies.
2020: Supreme Court of India struck down the ban on cryptocurrency trading as unconstitutional.
2021: Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 introduced.
Plan to ban private digital currencies in favor of an RBI-backed currency.
Proposed a 3-6 month exit period before banning crypto trading, mining, and issuance.
Cryptocurrencies, while unregulated, are not illegal in India.

RBI exploring Distributed Ledger Technology (DLT) for a Central Bank Digital Currency (CBDC).
DLT records details in multiple places simultaneously, with blockchain being one type.
CBDC would be legal tender and exchangeable at par with cash.

AMIGOS IAS