Indian Finance Ministry and IMF Warn Against Crypto Adoption

Key Insights:

• IMF has warned against the use of digital assets citing them as risky. 
• The Indian government, in line with the IMF, has also red-flagged crypto adoption. 
• However, over the last few years, crypto adoption in India has seen a rise. 

Despite the larger crypto market’s recent recovery, apprehension from regulators around the asset class continues to haunt crypto enthusiasts. The International Monetary Fund (IMF) flagged several risks around cryptocurrencies as legal tender.

IMF Shows Cryptos a Red Flag

In a recent podcast, IMF Managing Director Kristalina Georgieva and Deputy Managing Director Gita Gopinath discussed crypto regulation. When the two IMF heads were asked how governments should respond to the growing number of challenges facing the global economy, including cryptocurrencies, they said, 

“We’ve certainly seen an increase in the use of cryptocurrencies before this war, and we’ve seen it happen more in emerging markets than in others.” 

Georgieva hoped that awareness around the topic could ‘translate into appropriate policy action.’ However, the IMF Chief gave the nod to stablecoins citing that they are ‘backed by assets and are properly regulated.’ 

On a positive note, however, Gopinath commented on crypto adoption, saying, 

“I think parts of the world where there’s less financial inclusion, where people have less access to more regular forms of credit, cryptocurrency, and other related digital currencies can start playing a very important role.”

IMF Chiefs’ recent comments have created a considerable buzz, but most importantly, it sent the Indian government worrying about digital assets. 

Indian Govt Warns Against Cryptos

Notably, the IMF is currently helping India draft a comprehensive crypto policy. After the recent negative commentary by the Chiefs of IMF, representatives from India also called our cryptocurrencies risky assets. 

In a recent statement to an Indian publication, the IMF Mission Chief for India, Nada Choueiri, said that crypto assets posed significant risks to financial stability. He cited potential in the space for money laundering and terrorist financing. He was further stated that cryptos were also facilitative of frauds and cyberattacks.

Even though crypto adoption in India has soared over the last few years, the government has sought to curb its use. The nation’s recent finance bill voted in favor of a law that would impose a 30% capital gains tax – the highest bracket in the country on crypto. 

From April 1, there would also be a 1% tax on all crypto transactions to curb the use of cryptos. 

That said, at press time the top cryptocurrencies like bitcoin (BTC), ethereum (ETH), and major altcoins looked relatively less volatile. The global crypto market cap stood at $2.11 trillion noting, a 0.99% decrease over the last day.