Indian Finance Minister Says Global Consensus Required for Effective Crypto Regulation

India’s finance minister Nirmala Sitharaman on Sunday said crypto regulation without a global consensus will not be effective. The minister said this while responding to question on regulating digital or crypto currency during the interaction with ‘Thinkers Forum, Karnataka’ in India.

Sitharaman said crypto regulation must be based on a global template that all countries must work with in order to achieve success.

“The underlying principle is, because the digital currencies are completely digitalized and technology-driven, the technology which is very distributed, and some times identity is very difficult to be established, but which has potential, it will therefore have to be acted upon only with all countries coming on board,” Sitharaman said.

There have been efforts by different countries to regulate cryptocurrencies. In some, tough rules have been put in place while others are more lenient with regulating the industry. In the United States, regulators have been engaged in what seems to be an effort to gag the industry.  However, the efforts have been individual to this point with no global consensus on regulating the space.

International Bodies Agree on Regulation

Major global organizations including the OECD (Organisation for Economic Co-operation and Development) and other organisations like IMF, and G20 agree with India’s finance minister that a global approach is the way to effective crypto regulation.

“All of us will have to work together on it, otherwise regulating crypto may not be effective,” she said.

While crypto regulation may sound like a threat to the crypto industry, it is in fact a good thing for the industry since clear regulatory guidelines enable it to thrive. In countries where there is no such regulation, crypto companies suffer because they do not known what is required of them while regulators exploit their lack of direction.

The lack of global consensus also gives countries the power to decide what is right or wrong in their jurisdiction, and many of them take advantage to stifle the growth of crypto technology.

With a global approach, the industry can begin to thrive based on globally established standards that are fair and just to ensure that both the industry and governments enjoy the outcome. Governments can then put standard methods in place to ensure proper taxation of crypto investors, which is a win-win for both parties, unlike the current trend.

DLT Should be Preserved

While Sitharaman is calling for a global approach to regulate crypto, she still advocates for the preservation of distributed ledger technology. This is because there are good aspects of the technology that can be applied to some aspects of finance.

“But that does not mean that we are controlling the technology of -distributed ledger technology-, it has its goodness, potential and own strengths. We keep that in mind,” she added.’

DLT is the technology from which blockchains evolved. It is a platform that uses separate but connected features to store ledgers. This ensures the accuracy of data since several people have copies that can be verified. Based on that, cryptocurrencies are decentralized and do not have any central control.

It is the decentralized nature of cryptocurrencies that makes it difficult to regulate them, unlike the case with fiat currencies. As an alternative, governments around the world are working on the idea of central bank digital currencies (CBDCs) which use blockchain technology but can be controlled by the central bank.