India Looks to Coordinate Global Crypto Rulemaking as It Assumes G-20 Presidency

India, a country that has at times sought to ban and severely limit crypto usage within its borders, has as of Dec. 1 assumed the presidency of the Group of 20 – the intergovernmental forum of some of the world’s largest economies – just as much of the world is pondering whether stricter regulation of the industry is needed.

As India takes over the group, which includes 19 nations and the European Union as a bloc, for the next year, the country will bear the responsibility of shaping the group’s agenda.

Prime Minister Narendra Modi is no stranger to crypto. He has previously called for global cooperation to tackle challenges posed by cryptocurrencies as the technology “makes decisions taken by one country inadequate to meet the challenges.” India and its prime minister will host the 18th G-20 summit in New Delhi from Sept. 9-10, 2023.

The prioritizing of framing globally coordinated crypto rules reflects a renewed urgency for tighter regulations amid another chapter of crypto contagions triggered by the collapse of FTX.

A larger IMF role

India is looking to the International Monetary Fund (IMF) to lead consultations around the question of how to regulate crypto assets during its G-20 presidency, two people familiar with the matter told CoinDesk.

This could be a strategic geopolitical shift away from the Financial Stability Board (FSB), the international financial watchdog that has been the de-facto leader in framing rules. Recently, the FSB proposed comprehensive international crypto rules. The chair of its crypto working group urged authorities to agree on global norms for the industry even as he warned that crypto would soon threaten global financial stability.

“The IMF is [a member] of the FSB but the FSB, established after the 2009 G20 London Summit is seen to be closer to the G20 and the U.S. at a time of Russia’s war against Ukraine,” said a source often consulted on policy matters by India’s Finance Ministry. “India may not want to alienate its old ally, Russia. Instead, a subtle shift towards the IMF may be seen as more neutral.”

The IMF did not immediately respond to requests for comment.

The Indian finance ministry’s role

The G-20’s work is divided into the Finance Track and the Sherpa Track. The Finance Track consists of Finance Ministers and Central Bank Governors from all G-20 members. With India assuming the presidency, Indian Finance Minister Nirmala Sitharaman and her team, led by Finance Secretary Ajay Seth, will be setting the agenda.

The other track, known as Sherpa because it involves envoys appointed by heads of governments who take leaders of nations to the final G-20 summit carrying all the responsibilities, is for all agendas outside the financial sector.

India’s finance ministry brought in several officers to supercharge its efforts around agenda-setting for its G-20 presidency, CoinDesk has learned. The ministry has assigned these officials priorities, including crypto policymaking. In the past few weeks, these officials along with senior officials of the ministry have traveled to Bengaluru where the first two G-20 meetings in the Finance Track will take place.

The first of around 40 meetings in the Finance Track, the “Finance and Central Bank Deputies Meeting” will be held from Dec. 13 to Dec. 15, followed by the G-20 “Framework Working Group Meeting” on Dec. 16 and 17, confirmed people familiar with the matter.

India’s position on crypto

India’s government has refrained from taking a clear position on crypto. Sitharaman has said India hasn't set crypto-specific legislation yet because "we need to have all the members of the G-20 first of all to come on board to see how best it can be done.

"But this has not stopped India from imposing stiff taxes that have helped crush the local crypto industry. Other macroeconomic and crypto contagion factors are exacerbating the situation.

India will introduce its budget for the 2023-2024 fiscal year on Feb. 1, 2023, which is early during India’s yearlong G-20 presidency. The country could unveil new crypto-related tax rules that may be aligned with the G-20 but that would require a complete rethink, said Rajat Mittal, a tax counsel in India's Supreme Court.

Sitharaman can introduce rules for crypto if it is considered an asset in India, but the nation's central bank is responsible for overseeing crypto regulations if crypto is considered to be a currency. The Reserve Bank of India (RBI) has maintained a view that banning cryptocurrency usage within the country is the most suitable choice for India. In June 2022, RBI's Deputy Governor T. Rabi Sankar said that CBDCs could "kill" whatever little case that could be for private cryptocurrencies.

Sitting in on those Finance Track meetings will be Sankar and other RBI officials who will showcase its Retail and Wholesale Central Bank Digital Currencies (CBDCs), the pilots of which began in the past month, as part of India’s digital revolution.