By Press Trust of India | Updated: 6 June 2023
From fragmented monitoring and enforcement to differing classifications of crypto assets, many barriers hinder global coordination on crypto-asset regulation efforts, a global study said on Monday while calling for leveraging learnings from India.
The report published by the World Economic Forum (WEF) emphasised that while full global coordination for crypto regulation would be ideal, varying ecosystem maturity in different jurisdictions, evolving use cases, capacity of regulators and other factors make it difficult to achieve.
As such, regulators and industry players should explore alternative regulatory pathways to collaborate and regulate the crypto-asset ecosystem through a principle-based, agile approach, taking into consideration the local context.
In its section on recommendations, the report argued that the framework for crypto-asset regulations could leverage learnings from existing frameworks in financial services.
In this context, it cited the inter-operable regulatory sandbox of RBI as an example of cross-sector coordination; and data Empowerment and Protection Architecture (DEPA) as an illustration of having systems that are compliant by design.
“In India, the Reserve Bank of India released a Standard Operating Procedure for an Interoperable Regulatory Sandbox (IoRS) in October 2022. IoRS enables the testing of financial products/services that fall within the remit of more than one regulator,” it said.
It also noted, “Data protection and empowerment architecture in India provides for consent by design. The decoupling of a consent manager from the data provider/ consumer allows for neutrality and compliance with consent-related obligations.” Recently, India also extended its anti-money laundering laws to include ‘virtual digital assets’, while G20 is deliberating under India’s Presidency on creating global rules for regulating crypto-assets.
“The evolving crypto-asset ecosystem and recent market events have underscored the pressing need for collaboration and the building of robust guardrails,” said Matthew Blake, Head of WEF’s Centre for Financial and Monetary Systems.
Over the past few years, various international standard-setting bodies and organisations have made considerable efforts to produce evidence-based research as well as high-level frameworks.
Geneva-based WEF, which describes itself as an international organisation for public-private cooperation, also called on industry leaders to continue working on interoperable technical standards and focus on establishing and disseminating best practices.
“Crypto industry players have a vital role to ensure that the ecosystem evolves in a responsible manner and can learn from more mature industries to fulfil this role,” it said.
Regulating this dynamic sector effectively requires the utilisation of diverse regulatory tools, including legislative frameworks, voluntary codes of conduct and educational initiatives.
Furthermore, given the inherent transparency of these new technologies, it becomes conceivable to envision even more effective regulatory tools to address cross-border concerns, the WEF paper said.
“The coordinated efforts of all jurisdictions to regulate cryptocurrencies are extremely important. Even if you have the best tools and officers to trace cryptocurrency, all your efforts will be in vain once you bump into some non-regulated exchange that simply doesn’t provide information to law enforcement,” said Oleksiy Feshchenko, Advisor, Global Program against Cybercrime, UN Office on Drugs and Crime (UNODC).
