Editorial: Controlling cryptos
Taming an unregulated cryptocurrency market is possible only when countries can agree on a standard regulatory framework.
Hyderabad: Cryptocurrency is entirely technology-driven and is, at present, beyond the control of the regulatory systems. Any isolated attempt by a single country to control the virtual currency market will be of no use. It has to be a coordinated global initiative to figure out a solution which will be acceptable to various countries and at the same time applicable within each of the territories. As president of the G20 group, India has now taken up the task of initiating discussions among the members to arrive at a globally coordinated approach to the regulation of crypto assets. A collective global effort is needed to deal with the problems posed by cryptocurrencies. India will host a meeting of the G20 finance ministers and central bank governors later this month. Taming an unregulated cryptocurrency market is possible only when the countries can agree on a standard operating procedure for a regulatory framework. The G20 members represent around 85% of the global GDP, over 75% of the global trade, and about two-thirds of the world population. While the current Indian environment may seem unfavourable for crypto institutions, it is surely a starting point wherein the government is actually acknowledging crypto and digital assets. At present, the country does not have a regulatory framework for crypto but is taxing crypto income at 30% and also imposed a 1% tax deducted at source on crypto transactions. However, the Reserve Bank of India (RBI) continues to recommend a complete ban on crypto assets, including Bitcoin, saying they are a risk to the country’s financial system.
The biggest risks of the unregulated cryptocurrency market are money laundering and terror financing. It is for this reason that New Delhi has made a strong case for regulating cryptocurrencies at a global level. In transactions involving cryptocurrency, there are apprehensions that tainted funds could be mixed with other funds, making it much more difficult to get to the source and then shut the account down. Cross-border payments between countries will become hassle-free and effective through central bank-driven digital currencies alone. Governments and regulators across the world remain divided on how to categorise crypto and control it from an operational point of view. But, according to a global survey report, cryptocurrency crimes have increased 312% per year on average since 2016. India needs strong crypto regulations more than any other nation in the world as we are witnessing the mass adoption of digital assets at an exponential rate. Industry estimates put the total number of investors in India at 20 million. Being unregulated assets, the exponential investment growth in cryptocurrencies is dangerous with risks inherently associated with a highly volatile anonymous digital currency that could be severe both at the micro and macro levels. Cryptos are not an alternative to fiat money.
