The global financial institution International Monetary Fund (IMF) warned India over cryptocurrency by citing significant financial risks, while India is in talks with multiple parties to prepare a regulatory framework regarding digital assets in the country.
An unknown government official passed the discussion through the backdoor that India is engaging multilateral agencies and domestic institutions to bring regulation and policy over cryptocurrency. Currently, there is no crypto policy or regulation implied in the digital asset class.
However, Indian finance minister Nirmala Sitharaman proposed a Finance Bill that charges a 30% tax over cryptocurrency transactions was passed in the lower house of parliament on March 28.
The ongoing consultation can lead India to form a policy and framework on the digital asset class for its fruitful expansion in the country.
The Indian Finance Ministry is conducting meetings with different entities such as the IMF, World Bank, Reserve Bank of India, and Securities and Exchange Board of India (SEBI). The official stated that the finance ministry excluded cryptocurrency from the list of the asset class.
There is no official comment made on this news by the IMF. However, the mission chief for India, Nada Choueiri said in an interview that crypto-assets contain significant risks, including to financial stability.
“Crypto-assets can also be misused for money laundering, terrorist financing, and other illegal activities. Unless effective regulatory measures are implemented, the crypto-assets ecosystem could face serious consumer protection challenges such as fraud and cyberattacks” said Choueiri.
She added that the IMF also considers other countries’ stance on this issue as multilateral cooperation and synergy is much needed to create beneficial policy.
The Indian Finance Ministry could finalize the consultation paper in the next six months. The consultation paper will provide guidance to the Indian Government on how to deal with cryptocurrency related risks, and its treatment as an asset class.
“We have drafted a consultation paper on cryptocurrency. We are taking inputs from the IMF and the World Bank and incorporating these. We will update the consultation paper based on that, and based on the responses by the RBI, SEBI, we will be updating it” said another of the officials cited above.
“As far as crypto assets are concerned, there are risks that assets get into the financial system and no single country can control these risks on its own,” said the second official.
