IMF: India Is on the Frontline of Digital Currencies — Especially How It Handles Crypto Risks

Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva says India is “a country that is at the forefront of digital currencies,” especially “how it is dealing with reducing risk from crypto assets for Indian people and businesses.” She met with Indian Finance Minister Nirmala Sitharaman to discuss cryptocurrency regulation.

IMF Managing Director Kristalina Georgieva praised the Indian government’s approach to cryptocurrencies at an IMF press conference Wednesday.

Asked “what role India can play in improving the global economic situation to protect the interests of the most vulnerable,” the IMF chief said: “India is already playing a very important international role.” She elaborated:

And it is a country that is at the forefront of digital currencies, especially the central bank’s digital currency and how it is dealing with reducing risk from crypto-assets for the Indian population and businesses.

On Monday, the IMF boss met with Indian Finance Minister Nirmala Sitharaman, and crypto regulation was one of the topics they discussed.

Indian Finance Ministry officials reportedly consulted with the IMF and World Bank on cryptocurrency policy while the government works out how to treat crypto-assets.

As of April 1, the Indian government began imposing a 30% tax on cryptocurrency income with no possibility of offsetting losses or deductions. Subsequently, cryptocurrency trading volumes on exchanges across the country plummeted. An additional 1% withholding tax (TDS) will take effect soon.

India’s finance minister discusses cryptocurrencies at IMF meeting

India’s finance minister expressed concern about the risks of cryptocurrencies at last week’s IMF meeting. “I think the biggest risk for all countries in general will be the money laundering aspect and the aspect of using currency to finance terror,” she said.

Stressing that regulation is key, Sitharaman elaborated:

Technology-enabled regulation must be so skillful as to keep up with the curve, but make sure it is at the top.

India’s finance minister added that one country cannot do it alone. “It is impossible. If any one country thinks it can do it. It has to be everywhere,” she stressed.

Tobias Adrian, financial adviser and director of the IMF’s Monetary and Capital Markets Department, said last week that “regulation of crypto-assets is certainly on the agenda” for India.

Meanwhile, India’s central bank, the Reserve Bank of India (RBI), is working on a digital rupee, which the finance minister says will be introduced this fiscal year. Earlier this month, RBI Deputy Governor T. Rabi Sankar said the central bank would approach the launch of the digital currency “in a very calibrated, step-by-step way, assessing the impact at all stages.”

“The digital rupee will be a digital form of our physical rupee and will be regulated by the RBI,” Indian Prime Minister Narendra Modi explained earlier. “The digital rupee will revolutionize the fintech sector,” Modi noted.

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