The G20 summit in India, which commenced over the weekend, is expected to yield a collective consensus on the necessity for more stringent global regulations on cryptocurrency assets, as reported by The Hindu on September 6.

Noelle Acheson, formerly the head of research at CoinDesk and Genesis Trading, provides her insights in this article extracted from her Crypto Is Macro Now newsletter. This newsletter focuses on the intersection of the evolving crypto and macroeconomic landscapes. It’s important to note that the opinions expressed in the article are solely hers, and readers should not consider them as investment advice.

Why This Is Significant:
On one hand, this development carries significance because it signifies that key global regulators are working together to establish a coordinated framework for regulating cryptocurrencies. This recognition acknowledges three crucial attributes of crypto assets:

1. They are global: A Bitcoin in Bengaluru holds the same value as a Bitcoin in Seattle.
2. They can traverse borders discreetly: Given the potential impact on capital flows, there is a natural inclination to monitor and regulate them.
3. They are firmly entrenched in the financial landscape: Banning cryptocurrencies is no longer a viable option. Therefore, authorities are inclined to seek control as the next best alternative.

On the other hand, the parties involved in this initiative expose certain divisions beneath the apparent consensus, highlighting the fluid nature of global politics. This creates a situation where the attention and discussions surrounding this matter might be more noise than substance.

India:
Let’s begin with India, a country that has consistently called for international coordination in regulating cryptocurrencies. When India assumed the presidency of the G20 in December of the previous year, it made the coordination of crypto regulations one of its primary objectives, a stance reiterated in various statements throughout the year. However, it’s important to note that India is not particularly crypto-friendly.

As crypto markets gained traction, the Reserve Bank of India (RBI), the country’s central bank and financial regulator, felt compelled to issue regular warnings about the risks associated with crypto asset trading. In 2018, the RBI went further and issued a circular prohibiting banks from providing services to individuals or businesses dealing with virtual currencies. The circular was overturned by India’s Supreme Court in 2020, allowing banks to service virtual currency companies as long as they conducted due diligence.

However, banks have remained reluctant to engage with crypto services, possibly due to the fear of drawing scrutiny from regulators who disapprove of such activities. This situation is reminiscent of the United States, where servicing crypto companies is not illegal but is met with disapproval from regulatory bodies.

Furthermore, in early 2022, India imposed a 30% tax on all crypto income and trading profits, double the standard capital gains tax rate. This tax policy did not consider net losses offsetting gains in another asset. Despite this, it lent a degree of legitimacy to crypto activities, as taxing them indicated government recognition, even though the country’s banking regulator remained unsupportive.

The central bank’s position on crypto assets does not necessarily align with that of the Finance Ministry, but the overall tone of reluctance within India’s regulatory landscape is evident in the global call for crypto regulation.

G20:
Turning to the G20 itself, while its statements and agreements hold significance, they lack binding authority. The G20’s legitimacy is derived from the stature of its member nations, and this composition is evolving.

Contrary to common belief, the G20 does not exclusively comprise the world’s 20 largest economies. While most members are among the top 20, not all of them are, and some economies within the top 20 are excluded. This membership list was established in 2008 and has remained unchanged, despite shifts in economic power.

Recently, it was announced that the African Union would become an official G20 member in 2024, aiming to represent its 55 states. However, the African Union’s divergent voices may limit the practical impact of this inclusion.

Notably, key leaders like China’s Xi Jinping and Russia’s Vladimir Putin are not attending the G20 summit, raising questions about the group’s effectiveness.

External factors, such as the expansion of other alliances like BRICS, further complicate the G20’s position in global governance.

Moreover, the G20’s focus is about to change as India’s G20 presidency nears its end. Brazil, which assumes the presidency in December, has shown greater support for crypto markets, and its regulatory stance differs significantly from India’s. This shift in leadership is likely to redirect the G20’s attention.

In conclusion, while discussions and concerns about the restrictive nature of any resulting agreement may generate significant attention, the actual impact of these developments on the cryptocurrency ecosystem may ultimately prove to be limited.