Can India's G20 presidency be a turning point for domestic legislation for Virtual Digital Assets?

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The borderless nature of virtual digital assets (VDAs) presented a need for developing global consensus on minimum standards of regulation—this required discussion and for the worldwide community to come together to build a clear and comprehensive regulatory framework.

Although it is unlikely that crypto will be part of the leader's communique, India's G20 presidency provided it with a unique opportunity to set the agenda for discussion on one of the most important issues in the emerging technology space. India has used this opportunity to focus global attention on better understanding the VDAs, the risks and benefits associated with them and what could be an efficient and effective regulatory response to the same, a concern that has divided regulators (especially central banks) and governments across countries.

The technology has immense potential to exponentially contribute to the growth of nations—especially developing countries like India, Brazil, Argentina, and others. This is also a crucial opportunity for Indian leaders to leverage the G20 forum to redraw the contours of policy discourse around emerging Web technologies. In this time of persistent technological upheaval, India can anchor the next decade of change by creating the foundation for Web3. This can strengthen India's global profile and position it as a leader in developing and adopting these emerging technologies by driving global agendas.

Also read: Rationalise, regulate, revitalise? In search for crypto's 'RRR' moment with Budget 2023

Continuous reiteration and commitment to the VDA regulation agenda

Amidst several key priorities within the G20 presidency, India has placed considerable focus on ensuring a coordinated way forward on crypto assets. This sentiment has been echoed at the most senior level of leadership, including Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman. Further, exemplifying a coordinated approach, International Organizations (IOs) and Standard Setting Bodies (SSBs) such as the IMF, FSB and FATF have guided through a series of recommendations and expert reports.

The Indian Presidency of G20 has emphasised comprehensive regulation that could safeguard national interests, provide investor/user awareness and facilitate technology development over a blanket ban. Further, SSBs have recommended drafting the regulatory framework considering risks exacerbated in Emerging Markets and Developing Economies (EMDEs).

The key focus areas include macroeconomic and financial stability risks, particularly on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) measures, data privacy, cybersecurity, and consumer protection. The underlying principle guiding this framework is the notion of 'same activity, same risk, same regulation.'

Also read: Cryptocurrency tax: Your definitive guide to new rules

Acknowledging the importance of a coordinated approach among nations to mitigate cross-border regulatory arbitrage is essential. The regulatory framework should also strike a balance by allowing room for innovation while effectively addressing the systemic risks.

The great Indian opportunity

The crypto and Web3 technology world is rapidly expanding, with India being no exception. In recent years, India has seen a significant increase in adopting virtual digital assets and decentralised applications. This has been fuelled by a growing awareness among the public about the potential of these new technologies. According to a NASSCOM report on Virtual Digital Assets (VDAs), India has more than 450 Web3 startups, which have raised over $1.3 billion in funding in just the last two years. These 450 startups employ about 75,000 working professionals in the country. With a median age of 35, India's population is projected to have around 1.53 billion Internet users by 2040. This presents an immense opportunity for India to leverage this growth and lead the Web3 space worldwide.

Reality check

While consensus is being built globally, India needs to make urgent and substantial progress regarding domestic policy, which can be on the back of the year-long discussions. Several countries, such as Japan, Singapore, Dubai, the European Union, and Hong Kong, have already notified domestic legislation to become the hub for crypto companies and the innovations they bring to the team with their underlying technology. Crypto assets can lead India's path from an exporter of talent to an exporter of services, technology, and products. Having showcased its leadership role in pushing for global regulations, the time is ripe for India to display similar commitment and leadership by implementing progressive domestic legislation better suited to our requirements.

The author is co-founder of Primus Partners.

The thoughts and opinions shared here are of the author.