The proactive approach in drafting crypto-specific guidelines comes as a breather after years of talk of an outright ban on the sector, which was initially mooted by the Reserve Bank of India.
The Indian government may have shelved its plans to impose a blanket ban on cryptocurrencies, but there is still a long way to go, and the latest development shows that the country’s approach is a bit of a rollercoaster ride been.
A ‘positive precedent’ for the world
Indian financial regulators came to realize that regulating this domain effectively requires cooperation beyond the borders of one country. The alternative would be an exhaustive attempt to survey and control every device connected to the Internet.
As such, India has resorted to opening discussions with relevant stakeholders to chart a path forward. This year, India took on the role of chair of the G20, which presented a clear opportunity to shape global financial policy, especially cryptocurrencies.
The G-20 leaders’ statement has officially supported the Financial Stability Board’s (FSB) recommendations for supervising and regulating the activities related to crypto assets. They have also embraced a synthesis paper presented by the International Monetary Fund (IMF) and the FSB.
This report outlines a roadmap for a unified regulatory framework that takes into account various risks, including those unique to emerging markets, as well as those associated with money laundering and terrorist financing.
A proactive approach to establishing crypto-specific guidelines is a welcome sign, said Rahul Pagidipati, CEO of ZebPay. In a conversation with CryptoPotatoAccording to the director, the coming years will be crucial for the sector.
India’s chairmanship at the G20 marks an important step towards establishing a coherent global regulatory framework for the crypto industry, Pagidipati added. While the start of crypto-specific discussions is expected to set a “positive precedent,” there is still a significant journey ahead when it comes to formulating regulations for the DeFi sector.
A point of contention with DeFi regulations
Many countries around the world have taken proactive steps in establishing cryptocurrency regulations, even overcoming initial hesitation. However, the same level of regulatory diligence does not apply to the decentralized finance (DeFi) sector. In the case of the United States, their strategy has been to take an aggressive stance by first enforcing regulations and then crafting the specific rules.
In an effort to regulate the decentralized finance (DeFi) sector, the International Organization of Securities Commissions (Iosco), a global authority on securities market standards, recently released a consultation report aiming to finalize its policy recommendations by the end of the year to formalize to address the concerns regarding market integrity and investor protection within DeFi.
The DeFi sector has disrupted numerous fundamental tenets of traditional financial regulation, which typically rely on identifying a central person or entity charged with ensuring market fairness and investor protection. Therefore, determining who should be responsible for regulating space is a difficult issue.
On that aspect, the CEO of the Indian crypto exchange insisted:
“International regulatory bodies with global reach can work with blockchain and crypto organizations to create coherent regulations without stifling innovations. This can ensure that common standards are achieved, that clear and comprehensive guidelines are established and that applicable laws are enforced.”