India emphasizes the need for a common approach to regulating the crypto ecosystem” – Regulation

The Indian Ministry of Finance 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 meet the test of being a financial asset as they do not have intrinsic cash flows,” the Indian government stated.

The Treasury Department’s economic survey includes crypto this year

Indian Finance Minister Nirmala Sitharaman presented this 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 financial year and provides an economic outlook for the current financial year.

The Economic Survey, which includes cryptocurrencies for the first time this year, highlights the “need for a common approach to regulating the crypto ecosystem.”

The 414-page document explains: “The recent collapse of crypto exchange FTX and the subsequent sell-off in crypto markets have shone a spotlight on vulnerabilities in the crypto ecosystem,” and states:

Crypto assets are self-referential instruments and do not strictly meet the test of being a financial asset as they do not have intrinsic cash flows.

India's central bank, the Reserve Bank of India (RBI), also has warned again and again that crypto has no intrinsic value, adding that they pose risks to the country's financial stability. The RBI has recommended banning cryptocurrencies such as Bitcoin and Ether.

The Economic Survey also notes that “U.S. regulators have disqualified Bitcoin, Ether and various other crypto assets as securities.” However, US Securities and Exchange Commission Chairman Gary Gensler has confirmed this Bitcoin is a commodity but wouldn't comment on airwaves. Still, he emphasized it most other tokens are securities.

The Ministry of Finance's economic report then refers to a Joint announcement on January 3 by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), highlighting the three agencies' concerns about the risks that cryptocurrencies pose to the banking system.

The survey continues:

The geographically ubiquitous nature of the crypto ecosystem requires a common approach to regulating these volatile instruments. In this context, the global reaction to cryptos continues to evolve.

The document goes on to discuss current regulatory approaches worldwide, including in the European Union, Japan, Switzerland, the United Kingdom, Albania and Nigeria.

“Overseeing and regulating cryptocurrencies has been difficult, and regulators around the world are finding it difficult to keep track of the new and emerging issues in the fast-moving, unfamiliar space,” the survey adds, noting:

There are global minimum standards for unsecured crypto assets, which do not currently mitigate all risks and vulnerabilities.

The survey shows that standards bodies have made efforts to adapt and develop standards for regulating crypto. However, they focus on specific topics or sectors. “Therefore, regulatory gaps exist at every stage when crypto assets are issued, transferred, exchanged or stored by non-banks,” the document concludes.

India tried to develop a crypto policy over several years. A draft crypto bill was published in July 2019, but was not accepted into parliament. The finance minister previously said that the Indian government plans to discuss crypto regulation with G20 members in order to achieve a technology driven Regulatory framework for crypto assets. Last month the government unveiled its plan to: a Crypto Awareness Program.

Meanwhile, the RBI is testing its central bank digital currency (CBDC). A Wholesale digital rupee pilot was launched in November last year, while a Retail Pilot started in December.

What do you think about the Indian government including cryptocurrencies in this year's economic survey and placing its emphasis on a "common approach to regulating the crypto ecosystem"? Let us know in the comments section below.

Kevin Helms

As a student of Austrian economics, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects, and the interface between economics and cryptography.

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