Economic Survey Calls for Global Approach to Crypto Regulation

Economic Survey Calls for Global Approach to Crypto Regulation

The Ministry of Finance, Government of India, has called for a global approach to regulating the crypto ecosystem in its Economic Survey Report this year. "Crypto assets are self-referential instruments and do not strictly pass the test of being financial assets because they have no intrinsic cash flows attached to them," the report stated.

The Survey Report Includes Cryptocurrency

The Union Finance Minister, Nirmala Sitharaman, presented the Economic Survey Report 2022–23 in Parliament on Tuesday. The Economic Survey Report of the Ministry of Finance highlights the performance of the Indian economy in the previous financial year and presents an economic outlook for the current financial year.

The Economic Survey has included cryptocurrency for the first time this year and calls for a global approach to crypto regulation.

The 414-page report details "The recent collapse of the crypto exchange FTX and the ensuing sell-off in the crypto markets, exposing the vulnerabilities in the crypto ecosystem," elaborating:

"Crypto assets are self-referential instruments and do not strictly pass the test of being financial assets because they have no intrinsic cash flows attached to them."

The Reserve Bank of India (RBI) has also repeatedly warned that crypto has no intrinsic value and poses risks to the country’s financial stability. The RBI has recommended banning cryptocurrencies like bitcoin and ether.

The Economic Survey also states that "US regulators have disqualified bitcoin, ether, and various other crypto assets as securities." However, the chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, has confirmed that bitcoin is a commodity.

The Economic Survey also makes references to a joint statement made on January 3 by the US Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), which highlighted the concerns of the three agencies’ about the risks of cryptocurrencies to the banking system.

"The geographically pervasive nature of the crypto ecosystem necessitates a common approach to the regulation of the volatile instruments." In this context, the global response to crypto is evolving."

References to Regulatory Approaches Worldwide

The survey also makes references to the current regulatory approaches worldwide, including in the European Union, Japan, Switzerland, the UK, Albania, and Nigeria.

"Monitoring and regulating cryptocurrencies has been tricky, and regulators across the globe find it challenging to keep track of the new and emerging issues in this fast-moving uncharted field," the report adds, noting:

"There are minimal global standards applicable to unbacked crypto assets, which do not currently mitigate all risks and vulnerabilities."

The survey details that standard-setting bodies have been making efforts to adjust and develop standards for regulating crypto. However, they focus on specific issues or sectors. "Thus, there are regulatory gaps at each stage when crypto assets are issued, transferred, exchanged, or stored by non-bank entities," the document concludes.

India has been trying to develop a crypto policy for several years. The finance minister had earlier said that the Indian government plans to discuss crypto regulation with the G20 members to establish a technology-driven regulatory framework for crypto assets.

Meanwhile, the RBI is piloting its central bank digital currency (CBDC). A wholesale digital rupee pilot was launched in November last year, while a retail pilot began in December.

What is your take on the Indian government including cryptocurrency in this year’s Economic Survey and its call for a global approach to crypto regulation? Please post your comments.