Amid a clutch of developments this week along with India’s G20 presidency starting December 2022, there seems to be some progress towards global regulations on cryptocurrencies and digital assets, raising the hopes of the Indian crypto industry.
On October 10, the Organisation for Economic Co-operation and Development (OECD) responded to a G20 request to develop a framework by presenting the Crypto-Asset Reporting Framework (CARF). The framework is meant for the automatic exchange of information on crypto assets between countries.
A day later, on October 11, the Financial Stability Board (FSB), which is supported by the G20, released its proposed framework for international regulation of activities connected to crypto assets, a first for the global community.
Then, on October 13, Union Minister of Finance Nirmala Sitharaman was reported to have met Mathias Cormann, Secretary-General, OECD, on the sidelines of the International Monetary Fund (IMF) - World Bank annual meeting. The meeting is being seen as a step in the right direction, in terms of crypto regulation.
India’s G20 Presidency
India’s presidency of G20 from December 2022 has raised hopes of the crypto industry in India. In the past, Sitharaman and even the Reserve Bank of India (RBI) have highlighted the importance of a global framework on crypto regulation. The crypto industry feels that the G20 presidency may provide India with an opportunity to further that cause.
Ashish Singhal, co-founder and CEO, CoinSwitch, an Indian crypto exchange, said the world will be keen to hear India at G20. “It’s an opportunity to shape progressive policies that can make India competitive and spur innovation… We have been ahead of the curve in setting up a (tax) reporting framework (for cryptocurrencies), although there’s scope to refine other aspects, such as TDS (tax deducted at source) of 1 per cent,” he says.
India took its first step towards crypto regulation with the announcement of introduction of taxes on virtual digital assets (VDAs) during the Budget Session in February 2022.
Says Singhal: “While a few developed nations have put in place their own crypto regulations and framework, what the industry really needs is a common global standard. After all, crypto is a transformative technology that could profoundly change businesses across the world.”
The OECD Framework—CARF
The movement on a relevant framework—CARF—is also being seen in a positive light. The framework is meant for the automatic exchange of information on crypto assets between countries. The definition of crypto assets “includes assets that can be held and transferred in a decentralised manner, without the intervention of traditional financial intermediaries, including Stablecoins, derivatives issued in the form of crypto assets, and certain non-fungible tokens (NFTs ),” the report said.
Talking about the report, Rajagopal Menon, vice president, WazirX, a crypto exchange, said, “The OECD is a step in that direction (global concerted approach towards crypto assets), which will mandate sharing of crypto transactions in a standardised manner on an annual basis. This will give the regulators and the taxmen a framework on how to track, regulate, as well as tax crypto transactions,” he says.
The FSB Proposal
The draft framework includes nine significant proposals for the G20 economies, one of which is the adoption of a strong regulatory framework to monitor cryptocurrency activity.
“The current ‘crypto winter’ has reinforced our assessment of existing structural vulnerabilities in these markets. Concerns about the risks they pose to financial stability are, therefore, likely to come to the fore sooner rather than later, as are public expectations that policymakers have in place a robust international framework to identify, monitor, and address those risks,” FSB chair Klaas Knot said in a letter to G20 finance ministers and governors of central banks.