Op-ed: India’s dalliance with crypto ends in a win-win situation

The following is a guest post from Rajagopal Menon, Vice President at WazirX.

India’s crypto ecosystem finally has something to smile about following the conclusion of the G20 summit. The G20, representing the world’s most influential economies, fully endorsed the recommendations from the IMF and FSB as a Synthesis paper.

These guidelines aim to chart a clear path for the policy and regulatory framework for crypto assets and clarify key issues that many governments are concerned about. The paper not just advises against a blanket ban on crypto assets but also emphasizes several key principles to guide regulatory approaches in this rapidly evolving landscape.

Crypto’s influence on traditional monetary systems

A critical aspect addressed by the FSB Synthesis paper is the excessive capital flow volatility caused by crypto assets. To mitigate this risk, the paper recommends clarifying the legal status of crypto assets and ensuring that capital flow management laws comprehensively cover them.

In addition to that, monitoring the impact of crypto assets on the International Monetary System has been addressed. The paper stresses the need for unambiguous tax treatment of crypto assets to prevent evasion and ensure fair contributions to national revenues. The Synthesis Paper also provides detailed recommendations for crypto assets and Global Stablecoins (GSCs) to mitigate potential risks and foster innovation simultaneously. This addresses some of central banks’ and regulators’ concerns about crypto in many countries, including India.

Crypto’s status as a payment instrument

The Synthesis Paper distinguishes between crypto assets and traditional fiat currencies, indicating that this will prevent overlap or sovereignty issues in monetary systems. However, in 2021-22, many multinational organizations adopted crypto as payment. Many of them still continue to accept it for goods and services.

While integrating crypto in traditional payment systems will be tedious, if the ecosystem becomes less volatile, it can be considered in niche B2C/B2B businesses before becoming mainstream. Before that, the utility of the tokens to be used and their underlying assets should be clearly established, and enough liquidity should be ensured so that no stakeholders are at a disadvant

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Author: Rajagopal Menon

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