India to explore unsupported crypto ban in its G20 Presidency

India said on Thursday that under its current G20 presidency, it will prioritize the development of a framework for the global regulation of unbacked crypto assets, stablecoins and decentralized finance and would explore the "possibility of [their] banning" in a potentially significant setback for the fledgling industry.

India began its year-long chairmanship of Group 20 earlier this month. The group, which includes 19 nations across continents and the EU, accounts for 85% of global GDP. It also invites non-member countries, including Singapore and Spain, as well as international organizations such as the World Bank and the IMF.

The Reserve Bank of India, India's central bank, said in a report today that crypto assets are highly volatile and exhibit high correlations to stocks in a way that challenges the industry narrative and claims that virtual digital assets are an alternative source of value due to their supposed inflation hedging benefits.

The Indian central bank has warned that policymakers around the world are concerned that the crypto sector is becoming more interconnected with traditional finance and “diverts funding from traditional finance with a wider effect on the real economy” .

The Indian central bank is one of the most vocal critics of the crypto industry. RBI Governor Shaktikanta Das warned last week that private cryptocurrencies will cause the next financial crisis unless their use is banned.

“The change in value of any so-called commodity is the function of the market. But unlike any other asset or commodity, our primary concern with crypto is that it has no underlying. crypto or private cryptocurrency is a fashionable way to describe what is otherwise 100% speculative activity,” he told a conference.

Das says that crypto owes its origins to the idea that it circumvents or breaks the existing financial system. “They don't believe in the central bank, they don't believe in a regulated financial world. I haven't heard a good argument yet about what public purpose it serves,” he said, adding that he believes crypto should be banned.

India is among the countries that have taken a strict approach with cryptocurrencies. Earlier this year, it began taxing virtual currencies, levying a 30% tax on winnings and a 1% deduction on each crypto transaction.

The country's move, alongside the market downturn, has severely depleted transactions that local exchanges CoinSwitch Kuber, backed by Sequoia India and Andreessen Horowitz, and CoinDCX, backed by Pantera, process in the country.

Changpeng "CZ" Zhao, founder and CEO of the world's largest crypto exchange, Binance, told TechCrunch in a recent interview that the company does not view India as a "very favorable environment for cryptography". He said the company was trying to raise concerns with the local authority about local taxation, but said tax policies usually take a long time to change.

“Binance goes to countries where the regulations are pro-crypto and pro-business. We're not going to countries where we won't have a sustainable business – or any business, whether we go or not,” he said.

Coinbase, which has backed both CoinDCX and CoinSwitch Kuber, launched its crypto platform in the country earlier this year but quickly canceled the service amid a regulatory alert. Coinbase co-founder and managing director Brian Armstrong said in May that the company had disabled Coinbase's support for local infra UPI payments "due to some informal pressure from the [central bank] Reserve Bank of India." .

With over 600 million connected users, India is the second largest internet market in the world. The country, home to one of the largest startup ecosystems in the world, has attracted more than $75 billion in investments from Google, Meta, Amazon, Sequoia, Lightspeed and Tiger Global over the past decade.