NEW DELHI: The government will have a calibrated approach on cryptocurrency and will not rush ahead despite the recommendations of a synthesis document prepared by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) accepted last week by the finance ministers and central bank governors of the G20 in Marrakech.
While the RBI has made its concerns public, the government is expected to commission experts to assess how recommendations on each of the parameters would impact India and also suggest ways to address them.
The synthesis document, submitted ahead of the G20 leaders’ meeting in Delhi last month, had identified at least nine risks, ranging from financial and macrostability to monetary policy and fraud and possible use by criminals (see chart). It had called for the licensing and regulation of crypto assets and recommended that countries should adopt FATF (Financial Action Task Force) standards to check money laundering and terrorist financing.
Officials said the government wants to act in a way that covers the risks, and that a foolproof regime has been put in place, as rashness can have serious consequences for the economy. Based on the assessment by experts, or panels as may be constituted, the government will take the next set of measures and consult regulators such as RBI and Sebi.
For example, when it comes to trading on exchanges, the functions of the custodian, custodian and exchange will have to be split, unlike in different jurisdictions where the exchange plays all the roles, creating the risk of a collapse. Moreover, political approval will be needed as Prime Minister Narendra Modi and Home Minister Amit Shah have raised concerns about possible misuse.
In Marrakesh, RBI Governor Shaktikanta Das warned against rushing in. “The fundamental question is whether governments and central banks are comfortable with private money, because currency is a sovereign function. Their financial consequences, negative consequences for the domestic and global monetary system and order, must be understood… We must understand all risks before accepting them. We need to know how many sharks there are before we enter the waters,” he had said.
While the RBI has made its concerns public, the government is expected to commission experts to assess how recommendations on each of the parameters would impact India and also suggest ways to address them.
The synthesis document, submitted ahead of the G20 leaders’ meeting in Delhi last month, had identified at least nine risks, ranging from financial and macrostability to monetary policy and fraud and possible use by criminals (see chart). It had called for the licensing and regulation of crypto assets and recommended that countries should adopt FATF (Financial Action Task Force) standards to check money laundering and terrorist financing.
Officials said the government wants to act in a way that covers the risks, and that a foolproof regime has been put in place, as rashness can have serious consequences for the economy. Based on the assessment by experts, or panels as may be constituted, the government will take the next set of measures and consult regulators such as RBI and Sebi.
For example, when it comes to trading on exchanges, the functions of the custodian, custodian and exchange will have to be split, unlike in different jurisdictions where the exchange plays all the roles, creating the risk of a collapse. Moreover, political approval will be needed as Prime Minister Narendra Modi and Home Minister Amit Shah have raised concerns about possible misuse.
In Marrakesh, RBI Governor Shaktikanta Das warned against rushing in. “The fundamental question is whether governments and central banks are comfortable with private money, because currency is a sovereign function. Their financial consequences, negative consequences for the domestic and global monetary system and order, must be understood… We must understand all risks before accepting them. We need to know how many sharks there are before we enter the waters,” he had said.
