In its flagship economic survey this year, India’s finance ministry stressed the need for a “common approach to regulate the crypto ecosystem.” The Indian government said that “crypto assets are self-referential instruments and do not strictly pass the test of being financial assets as they have no intrinsic cash flow attached to them.
The Ministry of Finance’s economic survey included this year’s crypto
Indian Finance Minister Nirmala Sitharaman announced theEconomic Survey 2022-23in Parliament on Tuesday. The Economic Survey 2022-23was released in Parliament on Tuesday. The Economic Survey is the annual flagship document of the Ministry of Finance that outlines the performance of the Indian economy in the previous year and presents the economic outlook for the current financial year.
Including cryptocurrencies for the first time this year, the Economic Survey highlights “the need for a common approach to regulate the crypto ecosystem.”
The 414-page document elaborates, explaining that “the recent collapse of the crypto exchange FTX and the subsequent sell-off in the crypto market have put the spotlight on the vulnerabilities of the crypto ecosystem.”
Crypto assets are self-referential instruments and do not strictly pass the test of being financial assets because they have no intrinsic cash flow associated with them.
India’s central bank, the Reserve Bank of India (RBI), has also repeatedly warned that crypto has no intrinsic value, adding that it poses a risk to the country’s financial stability The RBI has recommended a ban on cryptocurrencies like bitcoin and ether.
The economic study also states that “U.S. regulators have disqualified bitcoin, ether, and various other crypto assets as securities.” However, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler confirmed that bitcoin is a commodity, but said he did not comment on ether. Nevertheless, he stressed that most other tokens are securities.
The Treasury Department’s economic survey then referred to a January 3 joint statement by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) that highlighted the three agencies’ concerns about the risks cryptocurrencies pose to the banking system.
The geographic spread of the crypto ecosystem requires a common approach to the regulation of these volatile instruments. Against this backdrop, a global response to crypto is evolving.
This publication describes current regulatory approaches in countries around the world, including the European Union, Japan, Switzerland, the United Kingdom, Albania, and Nigeria.
“Cryptocurrency oversight and regulation is tricky, and regulators around the world are finding it difficult to keep track of new and emerging issues in a fast-moving, uncharted area.” The survey additionally noted that.
There are minimum global standards that apply to unsupported crypto assets, which currently do not mitigate all risks and vulnerabilities.
The study details that standard-setting bodies have made efforts to coordinate and develop standards to regulate cryptography. However, they have focused on specific issues and sectors.” Thus, where cryptographic assets are issued, transferred, exchanged, or stored by entities other than banks, there are regulatory gaps at each stage.” The document concludes.
India has been attempting to formulate a crypto policy for several years; a draft crypto bill was released in July 2019 but was not taken up by Parliament. The Finance Minister has previously stated that the Indian government plans to discuss crypto regulation with G20 members to establish a technology-driven regulatory framework for crypto assets. Last month, the government announced plans to launch a crypto awareness program.
Meanwhile, the RBI is piloting the Central Bank Digital Currency (CBDC). The wholesale digital rupee pilot was launched last November and the retail pilot in December.
What do you think about the Indian government’s emphasis in this year’s Economic Survey on a “common approach to regulate the crypto ecosystem,” including cryptocurrencies? Let us know in the comments section below.
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