Key Takeaways:

• Indian Crypto Regulations will be based on IMF and FSB technical paper.
• The paper was mostly negative but rejected the idea of a crypto ban.
• It could take around 12-15 months depending upon the complexity of the law.

A while ago, during India’s G20 Presidency, Nirmala Sitharaman, the Finance Minister, had asked for a global consensus on regulating cryptocurrencies. Indian crypto regulations were supposed to be based on a joint technical paper, which was to be submitted by IMF and FSB.

Now, that both the institutions have submitted the technical paper, called the Synthesis Paper, on “regulation of digital assets”, it is expected that India will soon formulate a regulatory law on cryptocurrencies based on those papers.

What does the Synthesis Paper by IMF and FSB Say?

The most major things noted on the paper was that it would be impossible to ban crypto. This is because of crypto addresses’ ability to communicate with other nodes on its own. Further, since most of the crypto addresses, wallets and even nodes are anonymous, it would be impossible to track transactions as long as they do not convert these assets to cash.

The second major opinion was to stop the flow of capital into crypto. The reason stated for this was that it could destabilize a country’s macroeconomics which was true but only for micro and smaller sized economies. Larger economies like India, USA, China, and France have complex mechanisms of making fiat more desirable than cryptocurrencies.

Third major statement notes that crypto poses a serious environmental risk supposedly because of Proof of Work Consensus Mechanism. This is the same consensus mechanism that powers Bitcoin. It was argued in the paper that crypto consumes a lot of energy and also produces a lot of waste.

However, a solution to this could be the path which was followed by Ethereum. The blockchain converted itself from a Proof of Work blockchain to a Proof of Stake blockchain and therefore reducing 99.9% of its energy consumption.

When can we Expect Indian Crypto Regulations?

In my experience as a close observer of Indian laws, I saw that it generally takes 2-6 months to formulate a bill, which is the precursor of an act (law).

Then it takes almost 6 to 9 months again to frame the rules by which the law will be implemented.

This time, since there is a considerable amount of financial aspects involved including taxation, tracking and reporting, it would take a little more time.

Overall, the crypto regulations should be converted into a bill in almost a year from now.