The Need for a Common Framework to Address Cryptocurrency Risks: India’s Perspective as G20 Presidency

On April 11th, Indian Finance Minister Nirmala Sitharaman stated that India’s purpose as the G20 presidency is to develop a common framework for all countries to address the risks associated with cryptocurrencies following recent shocks in the cryptocurrency market. Given the numerous crashes and impacts of cryptocurrencies, cryptocurrencies were a very important part of the discussions during the G20 Indian presidency. We seek to develop a common framework for all countries to address this issue.

Indian Finance Minister: India’s G20 presidency aims to develop a common framework to address cryptocurrency risks

Cryptocurrency has gained widespread popularity across the globe since its inception in 2009. The decentralized nature of cryptocurrencies has revolutionized the concept of currency and facilitated cross-border transactions. However, with the increasing popularity of cryptocurrencies, the emerging risks associated with them have also become more evident. Recent shocks in the cryptocurrency market have triggered concerns globally, and India is no exception. In this article, we will explore the stance of India as G20 presidency and the need for developing a common framework to address the risks associated with cryptocurrencies.

Overview of Cryptocurrencies and Recent Risks

Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. They operate outside the traditional financial system and are not regulated by any central authority. Some of the popular cryptocurrencies include Bitcoin, Ethereum, Tether, Ripple, etc.
The recent history of cryptocurrencies has been marked by several shocks that have impacted the market sentiment. The most recent one being the dip in Bitcoin prices in May 2021. The increasing investment in cryptocurrencies has also led to increased cyber-attacks and frauds, with several investors losing their money. The rise of decentralized financing (DeFi) platforms has also given rise to several new risks that need to be addressed.

India’s Stance as G20 Presidency

As the G20 presidency, India has taken a proactive approach to address the risks posed by cryptocurrencies. In her statement on April 11th, Indian Finance Minister Nirmala Sitharaman highlighted the need to develop a common framework that would be applicable to all countries to address this issue. The discussions around cryptocurrencies were a vital component of the G20 Indian Presidency discussions.
The Indian government has been actively exploring the possibility of introducing a central bank digital currency (CBDC) and has set up a high-level inter-ministerial committee to examine the feasibility of this initiative. The Reserve Bank of India (RBI) has also been exploring the launch of a digital rupee.

The Need for a Common Framework

Cryptocurrencies transcend geographical boundaries, and their regulation poses a significant challenge to governments across the globe. The lack of a common framework for regulating cryptocurrencies has led to several countries adopting different approaches, thus leading to confusion and inconsistency across the world. The absence of a centralized authority also makes it challenging to regulate the cryptocurrency market.
A common framework for all countries to address the risks associated with cryptocurrencies would provide clarity on the regulatory landscape, leading to a reduction in volatility and increased adoption of cryptocurrencies. This would also lead to increased investor confidence, boosting investment in the cryptocurrency market. A common framework would also enable countries to collaborate effectively in addressing the financial risks posed by cryptocurrencies.

Conclusion

The increasing popularity of cryptocurrencies has led to several new risks, and the recent shocks in the cryptocurrency market have triggered concerns globally. As the G20 presidency, India’s vision to develop a common framework for all countries to address the risks posed by cryptocurrencies is a welcome step. A common framework would bring clarity and consistency to the regulatory landscape, and we hope that all countries can collaborate effectively to address the financial risks posed by cryptocurrencies.

FAQs

Q1. What are the risks associated with cryptocurrencies?
Ans. The risks associated with cryptocurrencies include the vulnerability to cyber-attacks, frauds, market volatility, and lack of regulatory clarity.
Q2. How can a common framework benefit the cryptocurrency market?
Ans. A common framework would bring clarity and consistency to the regulatory landscape, leading to increased investor confidence and reduced market volatility.
Q3. What is India doing to address the risks posed by cryptocurrencies?
Ans. India, as the G20 presidency, is developing a common framework for all countries to address the risks associated with cryptocurrencies. The Indian government is also exploring the possibility of introducing a central bank digital currency.