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The United States and the International Monetary Fund (IMF) agreed with India's plan to regulate cryptocurrencies after world finance leaders met at the G20 summit.
India has shown interest in a coordinated international response to the problems caused by cryptocurrencies like bitcoin.
The country's Ministry of Finance recently announced that it had organised a seminar for the G20 member states to discuss the development of a standardised regulatory structure.
According to two people familiar with the discussions, while the G20 forum welcomed discussions for a global crypto regulatory framework, not everyone agreed to discussions of an outright ban on private digital assets.
US Treasury Secretary Janet Yellen called for a "vital" regulatory framework but also said that the US had not proposed any broad bans.
Yellen stated that while the Federal Reserve has not advocated for a complete ban on cryptocurrency operations, a robust regulatory framework is necessary.
"We haven't suggested outright banning of crypto activities, but it is critical to put in place a strong regulatory framework," Yellen said. "We're working with other governments."
That aligns with the mood and assessment of other members at the G20 gathering, according to sources within the Indian finance ministry.
IMF Calls for Ban
But the broader outlook contrasts with the IMF's blueprint for how countries should approach crypto assets.
After co-chairing a meeting with India Finance Minister Nirmala Sitharaman, IMF managing director Kristalina Georgieva told reporters that crypto bans should be considered.
"We have to differentiate between central bank digital currencies backed by the state and stablecoins and crypto assets privately issued," Georgieva said.
"There has to be a very strong push for regulation... if regulation fails, if you're slow to do it, then we should not take off the table banning those assets because they may create financial stability risk," she added.
That comes on the heels of the IMF's nine points planner, in which a request dominated the research paper – countries should not recognise cryptocurrencies like bitcoin as legal tender.
Indeed, a paper titled "Elements of Effective Policies for Crypto Assets" advised member countries on important aspects of an acceptable policy response to crypto assets.
The top recommendation was to "safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and not grant crypto assets official currency or legal tender status."
The IMF directors "generally agreed" that crypto assets should not be granted official currency or legal tender status. Though strict bans of assets are "not the first-best option," a few directors thought that should not be ruled out.
India Leads Dialogue
But the members at the G20 gathering were not completely convinced of such a tough stance, said sources within the Indian finance ministry.
The sources added, despite the IMF's strong take, the likely outcome would be countries agreeing to further discussion on plans for a global structure and increased scrutiny of digital assets.
India, which currently holds the G20 presidency, released a statement claiming that the talks had sparked a wider discussion of cryptocurrency. Moreover, it posed "several pertinent policy questions that policymakers and regulators need to evaluate closely."
As India put it, "there is also an existential question on whether crypto assets are indeed the optimal solution for existing challenges in global financial systems, in addition to evaluating the consequences of crypto assets to the broader economy."
India's attitude towards cryptocurrency has been all over the map.
The country's central bank banned crypto startups 2018 from using the country's payment network and introduced a new tax regime in the same year.
As a result, volumes on cryptocurrency exchanges have plummeted after a steep transactional tax was imposed.
Still, India wants a global consensus on crypto and wants to lead from the front on the framework to regulate private digital assets.
For now, the only clear thing is that the world leaders want more regulations but are convinced an outright ban is not the need of the hour.
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