Globally, countries have chosen different approaches to address the controversial issue of cryptocurrencies. While some have introduced strict regulatory frameworks, others have opted for outright bans. India's approach has also been mixed. In 2018, the RBI banned Indian banks from dealing or facilitating cryptocurrency transactions. In 2020, the Supreme Court overturned this. In the Union Budget 2022-23, a 30 per cent tax on income from the transfer of digital assets has been proposed, along with a 1 per cent TDS (tax deduction at source) on such transactions. Considering the borderless nature of cryptocurrencies, Finance Minister Nirmala Sitharaman has said that any legislation to regulate or ban can only be effective through global collaboration. A paper from the IMF and the Financial Stability Board (FSB) last week noted that โa comprehensive regulatory and policy responseโ is needed to address the risks that cryptoassets pose to financial stability. On Saturday, the G20 Leaders' Declaration endorsed the FSB's recommendations and also welcomed the document's roadmap "that will support a coordinated and comprehensive policy and regulatory framework."
The decision to ban cryptocurrencies is not an โeasy option,โ as the IMF-FSB document points out. It may even be difficult to enforce: a ban in one jurisdiction could simply lead to crypto activity moving to other, friendlier jurisdictions. Additionally, this approach may end up pushing cryptocurrency transactions out of a country's area of โโscrutiny. This can increase financial integrity risks. Conversely, regulation and supervision of registered or licensed cryptoasset issuers and service providers could help close information gaps, making it easier to track cross-border activities. Several more measures need to be taken. For example, the document advocates the need to implement the Financial Action Task Force's anti-money laundering and anti-terrorist financing rules that apply to cryptocurrencies and service providers.
Finance ministers and central bank governors from G20 countries will meet in October to discuss how to take forward the roadmap outlined in the IMF-FSB document. This is welcome progress. Considering the transnational nature of cryptocurrencies, global coordination is required.
