Source: IE
Context: The article highlights the differences in cryptocurrency regulations worldwide.
What is cryptocurrency and how it is different from Central bank currencies?
Cryptocurrency is a digital or virtual form of currency that uses cryptography for security. It operates on decentralized technology called blockchain, which records all transactions transparently.
Unlike central bank currencies (fiat currencies), cryptocurrencies are not issued or regulated by a central authority like a government or central bank. They are decentralized, borderless, and typically have limited supply, making them immune to government manipulation and often subject to price volatility.
The current regulatory framework for cryptocurrencies in India:
- In 2018, the Reserve Bank of India (RBI) banned Indian banks from engaging in cryptocurrency transactions.
- In 2020, the Supreme Court of India overturned the RBI’s ban on cryptocurrency transactions.
- In the 2022-23 Union budget, India proposed a 30% tax on income generated from digital asset transfers and a 1% Tax Deducted at Source (TDS) on cryptocurrency
The major view of the IMF and the Financial Stability Board (FSB) paper on cryptocurrencies:
- Difficulty in Banning Cryptocurrencies: Banning cryptocurrencies may not be an effective option as it could lead to activities shifting to more crypto-friendly jurisdictions and push transactions outside a country’s oversight, raising financial risks.
- Regulation Over Ban: The paper suggests that supervising licensed crypto-asset issuers and service providers can help fill information gaps and facilitate the monitoring of cross-border crypto activities.
- Anti-money Laundering Standards: It recommends implementing the Financial Action Task Force’s standards to combat money laundering and terrorist financing related to cryptocurrencies.
The G20 Leaders Declaration endorsed the FSB’s recommendations and welcomed the paper’s roadmap for a coordinated and comprehensive policy and regulatory framework.
About FSB:
The Financial Stability Board (founded in 2009; HQ: Basel, Switzerland) is an international body that monitors and makes recommendations about the global financial system. It was established after the G20 London summit (2009) as a successor to the Financial Stability Forum.
