India Working Towards Consensus on Crypto-Assets and Climate Transition at G20 Presidency

From calling for a global framework on regulating crypto-assets to yielding on climate transition, India, as part of its G20 presidency, is working to evolve a consensus on a range of contentious issues even if that means stepping back on many of its stated positions.

IMF and FSB Recommend Licensing Regime for Crypto-Assets

On Thursday, the International Monetary Fund (IMF) and the Financial Stability Board (FSB), released a policy paper, at the request of the Indian G20 Presidency, which recommended against an outright ban on crypto-assets. Instead, it suggested introducing a licensing regime for crypto-asset platforms bringing the asset under the fold of anti-money laundering and counter-terrorist financing standards.

India’s Changing Stance on Crypto-Assets

India’s expected endorsement shows how far its key regulators have moved: In 2018, the Central Board of Direct Taxes had submitted a draft scheme to the finance ministry for banning virtual currencies and a month later, the RBI restrained banks from dealing in cryptocurrencies, a decision that had to be reversed by the Supreme Court in 2020.

Concerns Raised by the RBI

Despite this, the banking regulator has been vocal about its problems with crypto-assets, having identified them as “a macro-economic risk”. In July last year, underscoring that the RBI had sought a ban, Finance Minister Nirmala Sitharaman said in Parliament that “international collaboration” would be needed for “any effective regulation or ban” on cryptocurrency as the digital currency is borderless in nature.

Efforts on Climate Change and Financing for Developing Nations

During India’s presidency, multiple meetings on various issues have not been able to arrive at a single joint communique so far, primarily over objections of Russia and China over the inclusion of two paragraphs that call for the former to de-escalate and withdraw from Ukraine.

Apart from cryptocurrencies, during the various finance track meetings, India has tried to accommodate differing views on issues like climate change and financing for developing nations.

India’s Goal for a Global Regulatory Structure

“It will be a key win for us if we can get a consensus on creating a global regulatory structure for dealing with crypto-assets…we want to show that we can take the lead in global technology regulations. There could be some concerns by more crypto-friendly jurisdictions and those will need some ironing out,” a senior government official said.

“What India has signalled is that this is the beginning of the conversation on a global framework for regulating crypto-assets, with New Delhi acting as the main enabler, which in itself is a big win from our perspective,” he added.

Leaders’ Summit and Joint Declaration

The Sherpas of the G20 countries were in Manesar over the last three days, and their action will move to Delhi for the leaders’ summit today (September 9) as they work on coming up with a joint communique so that the leaders’ summit can produce a declaration.

India’s G20 Sherpa Amitabh Kant said Friday that there will be a New Delhi leaders’ declaration with India setting itself up as the voice of the Global South. He, however, did not respond to questions on whether the Russia-Ukraine issue would potentially derail the joint declaration.

Even as the paragraph in the final declaration on climate change and the inclusion of phasing out fossil fuels is expected to be a sticking point for Saudi Arabia, New Delhi is understood to have made an accommodation on the behest of the kingdom that the reference to “just climate transition” be changed to “just transition”. This could be reflected in the leader’s declaration, a senior official said.

Challenges and Concerns

The Indian Express had earlier reported that differences over food and energy security issues, especially opposition from Russia, were sticking points, with the Indian presidency willing to consider inclusion of the opposing view in the joint declaration text instead of a footnote.

On the issue of enhanced capital requirements for multilateral development banks (MDBs), sources said some countries expressed apprehension over the issue of their financial commitment. However, India, along with US support, has assuaged these concerns pushing for greater leveraging of MDB capital to enable these institutions face emerging challenges including climate change and digital public infrastructure.

That said, China can potentially play spoilsport here. It has pushed back on any debt package having “climate resilient” features under the discussions to address debt issues of lower-income and vulnerable middle-income countries.