G20 must create political consensus on harmonized regulation of crypto-assets

G20 governments will work towards a unified cryptocurrency policy. If successful, this crypto policy should serve as a framework that all member states should follow to regulate digital assets.

Commenting on this development, India’s Union Minister for Economic Affairs, Ajay Seth, explained at a press conference on Wednesday:

“Regulation should stem from the adopted political vision. In fact, one of the priorities that has been put on the table is to help countries build consensus for a political approach to cryptoassets.”

Economic leaders from these G20 countries believe that political consensus on crypto-assets would improve global regulation. To inform the agreement on the regulation of cryptoassets, Seth asked for the examination of a number of tax-specific matters. These include monetary policy, the banking sector and the financial implications of crypto.

The first meeting of G20 central bank alternates will take place this week in Bengaluru, India, from 13-15. December. The South Asian country assumed the G20 presidency for a year in early December, taking over from Indonesia. Apart from the cryptocurrency deliberations, the Bengaluru talks focused on a number of macroeconomic issues. These include financing for climate action and the Sustainable Development Goals, global debt vulnerability and consolidation of multilateral development banks.

The G20 Cryptocurrency Policy Forum became a necessity after the FTX Implosion

Cryptocurrency consensus discussions follow the sudden collapse of FTX, a once major stock market. The company filed for Chapter 11 bankruptcy protection in early November, sending shockwaves throughout the crypto space. After the FTX implosion, several other crypto-focused companies experienced insolvency crises of varying degrees. In addition, calls for tighter regulation of digital assets are growing.

Bahamian authorities arrested former FTX CEO Sam Bankman-Fried on Monday at the behest of the US government. The disgraced former CEO faces extradition to the United States to face multiple criminal charges. These include fraud and conspiracy, as well as misappropriation of customer funds.

Other intergovernmental organizations are also calling for better regulation of cryptocurrencies

The G20 is one of many intergovernmental organizations stepping up their efforts on cryptocurrency regulation. The Organization for Economic Co-operation and Development recently released a report calling for immediate political action. Like the G20, this global forum has also called for international cooperation on cryptocurrency policy. According to the Organization for Economic Co-operation and Development, a harmonized effort to monitor cryptocurrencies would avoid opportunities for regulatory arbitrage and fragmentation of global policies.

Indian Finance Minister Nirmala Sitharaman fully supports global cooperation on future cryptocurrency monitoring. She expressed criticism of digital currencies in July, saying that the Reserve Bank of India (RBI) does not consider cryptos as currencies. According to Sitharaman, the reason for this is that any modern currency requires the backing of a central bank or government. She then said:

“Cryptocurrencies are by definition borderless and require international cooperation to prevent regulatory arbitrage. Therefore, any regulation or prohibition legislation can only be effective after significant international cooperation on the assessment of risks and benefits and the development of a common taxonomy and standards.”

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