Blog Introduction: The Financial Stability Board is prepping guidelines on how the legitimate figures of India’s crypto currency market will take shape, which will be ready in October. This report will help the administration make a decision on whether to outlaw crypto currency trading through digital currency wallets and will deliver a legitimate structure.
The main concern the government has with crypto currencies is anonymous digital transactions could be used for money laundering and financing illegal activity. Indian authorities have been debating over how to deal with crypto currencies for more than a year now. The Reserve Bank of India (RBI) has already banned regulated financial institutions from providing services to businesses or individuals dealing in virtual currencies.
Why are guidelines being created?
The FSB’s responsibilities include tracking and making recommendations about the global financial system and monitoring threats to financial stability. It’s made up of representatives from major economies including the U.S., UK, Germany, France, Italy, Canada, Japan, and Switzerland. India is not a member but participates in some of the board’s work streams.
In its annual report this week, the FSB said that it continues to monitor developments in crypto assets “very closely” because of the speed of innovation and change in this area as well as because crypto assets could pose risks to global financial stability.
It added that work on crypto assets remains a priority for the board’s Committee on Payments and Market Infrastructures (CPMI), which focuses on ensuring global financial stability by developing policy recommendations on payments, clearing, and settlement systems. The CPMI is chaired by Ravi Menon, managing director of Singaporean monetary authority MAS.
Reasons for apprehensions around crypto currency
The Reserve Bank of India (RBI) has already banned regulated financial institutions from providing services to businesses or individuals dealing in virtual currencies. In July 2018, RBI Governor Shakti anta Das had said that the central bank was examining if there was a need for creating its own digital currency similar to Bitcoin after studying the pros and cons of such an initiative. globally regulators have taken steps including shutting down local exchanges and banning initial coin offerings (ICOs). In September 2017 China shut down domestic crypto currency exchanges and ICOs following which BTC/USD prices fell sharply from $5000 levels to $3000.
Will there be a ban on crypto currency trading?
The final call will be taken by an inter-ministerial committee set up by the government last year which includes representatives from departments such as economic affairs, revenue (tax), home affairs and information technology. The committee had submitted its report early this year but it is still being studied by various ministries. Reports suggested that the panel was leaning towards a complete ban on all private crypto currencies in India but allowing certain exceptions like state-run banks issuing ‘Central Bank Digital Currency’ (CBDC). At present, there are no clear regulations or any framework surrounding Indian crypto currencies which has resulted uncertainty among businesses looking to enter this space
We will have to wait until October to see what the FSB recommends regarding crypto currency trading in India. There is a lot of debate right now around whether or not there should be a ban on trading through digital currency wallets due to concerns around money laundering and financing illegal activity. However, nothing has been decided yet and the final call will be taken by an inter-ministerial committee set up by the government later this year. Stay tuned for more updates!
