The Indian Ministry of Finance has highlighted the need for “a common approach to regulating the crypto ecosystem” in its flagship Economic Survey this year. “Crypto assets are self-referential instruments and do not strictly pass the test of being a financial asset because they do not have intrinsic cash flows,” the Indian government stated.
The Ministry of Finance’s economic survey includes cryptocurrencies this year
India’s Finance Minister Nirmala Sitharaman introduced the Economic Survey 2022-23 in Parliament on Tuesday. The Economic Survey is an annual flagship document of the Ministry of Finance that outlines the performance of the Indian economy in the previous fiscal year and presents an economic outlook for the current fiscal year.
Listing cryptocurrency for the first time this year, the Economic Survey highlights the “need for a common approach to regulating the crypto ecosystem.”
The 414-page document explains: “The recent collapse of the FTX crypto exchange and the resulting sell-off in crypto markets have highlighted vulnerabilities in the crypto ecosystem,” explaining:
Crypto assets are self-referential instruments and do not strictly pass the test of being a financial asset because they do not have intrinsic cash flows attached to them.
India’s central bank, the Reserve Bank of India (RBI), has also repeatedly warned that cryptocurrencies have no intrinsic value, adding that they pose risks to the country’s financial stability. The RBI has recommended banning cryptocurrencies like bitcoin and ether.
The Economic Survey also states that “US regulators have disqualified bitcoin, ether, and various other crypto assets as securities.” However, US Securities and Exchange Commission (SEC) Chairman Gary Gensler has confirmed that bitcoin is a commodity, but did not comment on ether. However, he emphasized that most other tokens are securities.
The Finance Ministry’s Economic Survey then references a joint statement made on January 3 by the US Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). which highlighted the concerns of all three agencies. about the risks that cryptocurrencies represent for the banking system.
The Survey continues:
The geographically widespread nature of the crypto ecosystem requires a common approach to regulating these volatile instruments. Against this backdrop, the global response to cryptocurrencies is evolving.
The paper proceeds to discuss current regulatory approaches around the world, including in the European Union, Japan, Switzerland, the United Kingdom, Albania, and Nigeria.
“Monitoring and regulating cryptocurrencies has been complicated, and regulators around the world find it difficult to keep track of new and emerging issues in the fast-moving unknown field,” the Survey adds, noting:
There are minimum global standards applicable to unbacked crypto assets, which currently do not mitigate all risks and vulnerabilities.
The Survey details that standard-setting bodies have been making efforts to adjust and develop standards to regulate cryptocurrencies. However, they focus on specific topics or sectors. “Thus, there are regulatory gaps at every stage when non-bank entities issue, transfer, exchange, or store crypto assets,” the document concludes.
India has been trying to develop a crypto policy for several years. A cryptocurrency bill was published in July 2019, but failed to pass in parliament. The finance minister previously said that the Indian government plans to discuss cryptocurrency regulation with G20 members to establish a technology-driven regulatory framework for cryptocurrency assets. Last month, the government unveiled its plan to launch a cryptocurrency awareness program.
Meanwhile, the RBI is testing its central bank digital currency (CBDC). A wholesale digital rupee pilot was started in November last year, while a retail pilot started in December.
What do you think about the Indian government’s inclusion of cryptocurrency in this year’s Economic Survey and its emphasis on a “common approach to regulating the crypto ecosystem”? Let us know in the comments section.
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