New currency, next steps- Global collaboration and cooperation on regulation of crypto-assets

Source: The post is based on the article “New currency, next steps- Global collaboration and cooperation on regulation of crypto-assets is needed” published in The Indian express on 11th September 2023.

Syllabus: GS2- International relation- Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests & GS3- Security- security challenges (crypto currency and money laundering)

News: The article talks about differences in cryptocurrency regulations worldwide. It focuses on India’s evolving approach and stresses the importance of international cooperation for efficient cryptocurrency regulation or prohibition. It also mentions an upcoming G20 meeting to discuss a plan for coordinated cryptocurrency regulations.

What is the current regulatory framework for cryptocurrencies in India?

In 2018, the RBI banned Indian banks from cryptocurrency transactions.

In 2020, the Supreme Court of India overturned this ban.

In the 2022-23 Union budget, India proposed:

30% tax on income from digital asset transfers.

1% TDS on cryptocurrency transactions.

Finance Minister Nirmala Sitharaman emphasized the need for global collaboration for effective crypto regulation.

What is the major view of the IMF and the Financial Stability Board (FSB) paper on cryptocurrencies?

IMF and FSB View on Cryptocurrencies:

  1. Comprehensive Policy Needed:

The paper highlighted the necessity for a “comprehensive policy and regulatory response” to address the financial stability risks posed by crypto assets.

  1. Difficulty in Banning Cryptocurrencies: Banning crypto might just shift activities to more friendly jurisdictions. A ban could push transactions out of a country’s oversight, raising financial risks.
  2. Regulation Over Ban: Supervising licensed crypto-asset issuers and service providers can fill information gaps. This approach aids in monitoring cross-border crypto activities.
  3. Anti-money Laundering Standards: The paper suggests implementing the Financial Action Task Force’s standards that tackle money laundering and terrorist financing related to cryptocurrencies.
  4. Global Coordination: Emphasized the importance of worldwide coordination to address the borderless nature of cryptocurrencies.
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