G20 Roadmap on Crypto Assets: Proposed By Financial Stability Board and IMF

October 14, 2023

GS Paper III Indian Economy

Context:

Recently, the Finance Ministers and Central Bank Governors (FMCBG) from G20 nations adopted a roadmap for regulating crypto assets proposed by the Financial Stability Board (FSB) and the International Monetary Fund (IMF) at their meeting at Marrakesh in Morocco.

Roadmap for Crypto Regulation: Proposed by Financial Stability Board (FSB) and IMF

This was the fourth and final G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under the Indian presidency, with previous meetings held in Washington, Bangalore, and Gandhinagar.
Ministers and Governors adopted the Roadmap proposed in the IMF-Financial Stability Board synthesis paper on Crypto assets.
The IMF and the FSB created this paper at the request of the Indian G20 Presidency to synthesise policy suggestions and criteria.
The paper offers a comprehensive set of policy and regulatory recommendations aimed at identifying and addressing the macroeconomic and financial stability risks associated with crypto assets.

International Monetary Fund (IMF)

The IMF was conceived in July 1944 at the United Nations Bretton Woods Conference.
Functions: Providing loans and concessional financial assistance to member countries experiencing actual or potential balance-of-payments problems.
Headquarters: Washington D.C, USA.

Financial Stability Board (FSB)

Financial Stability Board is an international body that monitors and makes recommendations about the global financial system.
Headquarters: Basel, Switzerland.
Its decisions are not legally binding on members.
India is a Member of the Financial Stability Board

What is crypto currency and how does it work?

Cryptocurrency is a digital form of currency secured by Blockchain Technology.
It operates in a decentralized manner, free from government or institutional control.
Notable examples include Bitcoin, Ethereum, and Litecoin.

G20 Roadmap on Crypto Assets: It is an action-oriented roadmap that will help coordinate global policy as well as develop mitigating strategies and regulations on such assets.

Balanced Approach to Bans: The IMF and Financial Stability Board paper advocates for comprehensive oversight of crypto instead of a blanket ban.
- It also focuses on the implications for Emerging Markets and Developing Economies (EMDEs), which are anticipated to bear the brunt of the crypto market’s volatility.
Safeguarding Monetary Sovereignty and Stability: Paper highlights the importance of preserving monetary sovereignty and stability when dealing with Virtual Digital Asset (VDA).
- This involves not granting official currency or legal tender status to VDAs, which helps protect traditional monetary systems and national currency stability.
Clear Tax Treatment: Unambiguous tax treatment is essential for VDAs. Clear and consistent tax policies prevent evasion and ensure that VDAs contribute fairly to national revenues.
Monitoring the Impact on the International Monetary System (IMS): Given the global reach of VDAs, their impact on international financial stability must be monitored closely to safeguard the integrity of the IMS.