India will be finalising its public opinion on cryptocurrencies in the coming days, Ajay Seth, the secretary of the department of economic affairs recently affirmed in an interview. During the recently held G20 Summit in Delhi, international policymakers as well as officials from global financial institutions like the International Monetary Fund (IMF) — praised India for giving the idea of framing crypto laws that would work on a global level. As India and other G20 nations continue the work on drafting these rules, Indian Web3 players believe that the release of detailed laws would lead to a responsible industry use of blockchain and Artificial Intelligence (AI).
The awaited crypto laws that India and the other G20 nations are working on could mandate all firms working with digital assets to collect the KYC details of users, adhere to the Foreign Account Tax Compliance Act (FATCA), and meet anti-money laundering standards.
The crypto laws could additionally order crypto firms to regularly release proofs of reserves to ensure that market debacles like the FTX and Terra collapses do not shake up the ecosystem again, leaving investors high and dry.
With India’s approach, these rules would be uniform across several nations.
“Cryptocurrencies are emblematic of our evolving technological landscape. With the G20’s collective wisdom, we can responsibly integrate AI and cryptocurrencies into our societies,” Denis Sklyarov, Co-Founder and CEO of WiFi Map, a crypto centric DeWi (decentralised wireless) app, told Gadgets 360.
AI has been making its way to the crypto sector these recent months with AI-infused cryptocurrencies as well as generative AI chatbots coming up to help people get information and awareness around digital assets.
However, like industry players are using AI to forward their cause of expanding and growing the Web3 ecosystem, scammers and hackers are also exploiting the technology to hunt for unsuspecting victims and perform unlawful activities like money laundering.
“With a global regulatory framework in place, we can expect to better tackle challenges such as money laundering, terrorist financing, and market manipulation. We have already seen glimpses of this positive impact with the Travel Rule framework created by the Financial Action Task Force (FATF), which is being supported by exchanges, custodians and other virtual asset service providers (VASPs),” said Manhar Garegrat, Country Head for India and Global Partnership at Liminal, a digital wallet infrastructure platform.
The Travel Rule requires VASPs and financial institutions engaged in virtual asset transfers to collect and share the personal data of transaction originators and beneficiaries to prevent misuse of cryptocurrencies.
Meanwhile, the legal safeguarding of cryptocurrencies could ease people’s concerns on working with blockchain technology, which is another outlook that industry players are optimistically looking at for the future course of the adoption of this technology.
Blockchain technology uses a distributed and unchangeable ledger that can only be accessed by members with permission. This can secure data saved on blockchain from being tampered, hence increasing the transparency in record maintenances. But since blockchain serves as the underlaying technology for cryptocurrencies, it is also perceived as a risky, largely unchartered territory for many to foray into.
“It’s time for nations to come together and shape the future of crypto in a way that’s both progressive and secure. By harmonising regulations and promoting responsible crypto adoption, we can harness the full potential of blockchain technology, ensuring it benefits individuals, businesses, and economies worldwide,” Om Malviya, President at Tezos India, told Gadgets 360.
In the backdrop of the G20 summit held last week in Delhi, Gita Gopinath, the First Deputy Managing Director of the IMF, praised India’s work on these rules so far.
Thanks for your kind words. The @IMFNews has provided inputs for discussions on crypto assets. The Sovereign Debt Roundtable has proven effective in addressing debt distress. In particular, @GitaGopinath, you’ve been accessible and positive in your approach. Grateful. https://t.co/WpeFmpBfP8
— Nirmala Sitharaman (@nsitharaman) September 10, 2023
As part of its legal ideas to regulate crypto worldwide, India is also reportedly looking at giving crypto firms the status of ‘authorised dealers’ like traditional banks. In addition, the rules could require crypto firms to hire for positions like the Money Laundering Reporting Officers (MLRO).
Commenting on these upcoming laws, Dilip Chenoy, the chief of the Bharat Web3 Association (BWA) told Gadgets 360 that the IMF-FSB synthesis paper has already laid down the foundational work for these laws to be based on.
“Some of the priority areas highlighted in the document include anti-money laundering (AML) and Combating the Financing of Terrorism (CFT) as well as consumer protection initiatives. While it is too early to assume and comment on the approach that the Indian government will take, we must and will remain committed to developing a supporting ecosystem for orderly growth of the Web3 sector,” Chenoy noted.
At its highest valuation, the crypto sector breached the mark of $3 trillion (roughly Rs. 2,48,92,050 crore) in November 2021, surpassing Apple’s market cap at the time.
Owing to the lack of concrete regulations, however, back-to-back collapses of promising projects, as well as a plethora of crypto scams have dealt a blow to investor trust in the sector in the last two years. Presently, the crypto market valuation stands at $1.01 trillion (roughly Rs. 83,75,172 crore) and experts predict this number to boom once the sector gets a strong legal backbone.