G20 has the opportunity to regulate cryptocurrency

(Mains GS 2 & 3 : Government policies and interventions for development in various sectors and issues arising out of their design and implementation & Science and Technology- developments and their applications and effects in everyday life.)

Context:

• The G20 presidency provides India the opportunity to make significant progress on critical issues which includes debt relief, regulation of cryptocurrencies, and climate finance.  

Need for regulation:

• With no global consensus or frameworks in place, cryptocurrency regulation is one area where India can lead the way by leveraging the G20 presidency. 
• Cryptocurrencies were designed to be decentralized and their independent nature provides an alternative to traditional financial institutions, typically centralized and controlled by banks and NBFCs. 
• Cryptocurrency regulation is important for several reasons and one of the main reasons is to protect consumers from fraud and other financial crimes.
• Another reason for cryptocurrency regulation is to foster greater stability and reliability in the cryptocurrency market. 
• Cryptocurrencies are highly volatile, and their value can fluctuate significantly over short periods. 
• These intricacies make them risky for investors and make it difficult for businesses to use them as a form of payment. 
• By regulating cryptocurrencies, authorities can help reduce volatility and promote greater confidence in their use as a means of exchange.

Consistent with policies:

• Cryptocurrency regulation can ensure that cryptocurrencies are used in a way that is consistent with broader financial and economic policies. 
• This includes issues such as tax compliance and preventing money laundering and terrorist financing. 
• By setting rules for the use of cryptocurrencies, authorities can help ensure that they are not used for illicit purposes and that they are integrated into the broader financial system in a way that is beneficial to all stakeholders.

Consumer protection:

• India will host 40 meetings across the country as part of the finance track of its G20 presidency and these meetings will involve various working groups and four minister-level meetings intended to contribute significantly to global economic discussions. 
• The focus areas of the finance track include regulating crypto assets, managing debt vulnerabilities, and reorienting global financial institutions.
• Consumer protection must be at the heart of all deliberations on cryptocurrency regulation as the decentralised nature of cryptocurrency and the lack of a central authority or intermediary make it particularly important to ensure consumer protection from fraud, financial loss, and other risks.
• Consumer protection is an important consideration in regulating cryptocurrency and requires a combination of strong regulations and robust industry practices to prevent financial losses and other risks.

Conclusion:

• India has the unique opportunity to set the global benchmark for crypto regulation and inform governments worldwide about the fundamental principles that must underscore their crypto regulatory framework.