In support of the Financial Stability Board's (FSB) top-level guidance on crypto-assets regulation, G20 leaders, through the Delhi Declaration, have reaffirmed their dedication to vigilant oversight of the swiftly evolving crypto landscape. The Delhi Declaration document underscores the importance of effective and consistent global implementation of these recommendations to prevent regulatory arbitrage.
In a recent interview with CNBC-TV18, John Schindler, Secretary-General of the Financial Stability Board (FSB), stressed the significance of regulating crypto-assets amid increasing global demand. He acknowledged that while countries have the option to ban crypto assets, such bans have often led to a surge in crypto activity, highlighting the need for prudent regulation to mitigate financial system risks.
Schindler commended India's G20 Presidency for achieving a comprehensive framework for cryptocurrencies, emphasizing its potential impact on the evolving crypto landscape. He praised the inclusivity of perspectives, with contributions from the International Monetary Fund (IMF) and the Financial Action Task Force (FATF), creating a comprehensive regulatory framework.
Schindler also highlighted the framework's integration of critical elements such as financial stability, macroeconomics, monetary policy, and financial integrity. This holistic approach recognises the potential impact of crypto assets on monetary policy and emphasizes the importance of maintaining financial and market integrity in a crypto-driven economy.
In summary, the G20's commitment to vigilant crypto regulation, coupled with India's comprehensive framework, signifies a significant step towards ensuring the responsible and secure integration of cryptocurrencies into the global financial system.
It is crucial to note that G20 nations have acknowledged the need to lead by example in implementing this framework. Schindler emphasized the importance of widespread adoption, saying, "FSB members and the G20 have agreed very much that first they have to lead by example. So that's going to be an important part.
He further added that if the G20 nations implement the framework but rest of the world doesn't then the crypto firms are going to find those locations.
"So, what we are working on now is a plan with the IMF and the other standard-setting bodies and international organizations to ensure that we use all of our tools. The FSB has regional consultative groups. We have six of these around the world. The IMF has a very large reach and other tools. So, we are trying to put together a plan to get these recommendations out and implemented to build capacity within the different countries." he added.
India's stance on cryptocurrencies has consistently emphasized that effective legislation, whether for regulation or banning, can only be achieved through substantial international cooperation in assessing the associated risks and advantages.
Presently, crypto assets remain unregulated in India, with the government refraining from registering crypto exchanges. Given the borderless nature of crypto assets, their oversight necessitates international collaboration.
The Delhi declaration against the backdrop that crypto-assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, exacerbate fiscal risks, divert resources available for financing the real economy, and threaten global financial stability suggested for a comprehensive regulatory and supervisory oversight, which it said should be a baseline to address macroeconomic and financial stability risks. The emergence of clear risks necessitates appropriate policy responses, it added.
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