Economic Survey of India argues for ‘global approach’ to crypto regulation

Global crypto standards must be “comprehensive and consistent; regulatory responses must be based on standard taxonomies, reliable data to combat contagion effects and flexible enough to be adjusted in the future based on market developments and future international standards,” according to the Economic survey released by the Government of India for 2022-23.

The survey, prepared under the aegis of Chief Economic Advisor V. Anantha Nageswaran, noted that the market for crypto assets has been volatile, bringing to the fore their fragile backing, governance issues, growing complexity and their non-transparency.

“The geographically ubiquitous nature of the crypto ecosystem requires a common approach to the regulation of these volatile instruments,” the survey reads.

Why is this important: The survey is of vital importance as it is a vital document that sheds light on how the Finance Ministry views the state of the Indian economy and its challenges. The risks posed by cryptocurrencies to financial stability make the inquiry’s thoughts on cryptocurrency regulation relevant in determining the government’s approach to cryptocurrencies.

• The investigation says the recent collapse of FTX, a cryptocurrency exchange, and the subsequent sell-off in the markets have highlighted vulnerabilities in the ecosystem.
• Therefore, the survey noted that the issue of crypto asset regulation has become high on the political agenda of many countries, including in international forums like OECD and the G20, emphasizing the need for a globally coordinated approach.

What are the challenges: The survey indicates that crypto regulation is tricky and it is difficult to keep up with new and emerging issues in the “uncharted realm.”

• The fact that centralized intermediaries, such as crypto asset exchanges, wallet providers and crypto conglomerates remain “largely unregulated, is a source of concern globally.”
• “The growing importance of these entities could force regulators to consider them as systemic financial market infrastructures (MFIs),” the investigation said.
• The survey indicates that there are minimum global standards applicable to uncollateralized crypto assets, which do not currently mitigate all risks and vulnerabilities.
• He also said that standard-setting bodies (SSBs) remain focused on specific issues (financial integrity), sectors (payments, securities and banking), products (global stablecoins) or entities designated as systemic by national authorities , leaving regulatory gaps.
• “The cross-sector and cross-border nature of crypto limits the effectiveness of uncoordinated national approaches. The terminology used to describe different activities, products and stakeholders is not harmonized globally,” the survey said.
• The sector is vulnerable to criminal and terrorist abuse due to delays in meeting anti-money laundering and anti-financial terrorism obligations.

Echoes of the Indian Prime Minister’s comments: The survey’s support for a global crypto policy is in line with Indian Prime Minister Narendra Modi’s comments on the issue in the past. The country has also made clear that it intends to develop consensus for a coordinated approach during its presidency of the G20.

• The Prime Minister called on all nations to cooperate, as every global agency will need synchronized action to address this at the 2022 World Economic Forum. annual Davos Conference.
• Modi previously called for international order to ensure cryptocurrencies do not end up in the wrong hands at the Sydney Dialogue, reported The Hindu.

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