The finance minister of India has reiterated the risks that digital assets could have on an economy.
Speaking at an International Monetary Fund (IMF) seminar, Nirmala Sitharaman warned that money laundering and the financing of terrorism remained the two biggest threats.
The minister argued that crypto transactions have become huge and need to be brought under a regulatory framework. “As long as the non-governmental activity of the crypto assets is through unhosted wallets, regulation is going to be very difficult,” she said.
However, she conceded that the technology can make cross-border payments more effective through central bank-driven currencies.
Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS), said that he is looking at the crypto asset economy as a tokenized economy where anyone could tokenize assets.
While Singapore has become a major hub for crypto businesses, the MAS has warned of the risks of trading Digital Payment Tokens (DPT), adding that they are not suitable for the general public.
Backing the need for the right regulations for crypto assets, Menon said, “I think we need to look at the underlying activity and nature and quality of the crypto asset. Determine the specific risks they pose and apply regulation to address those risks.”
Singapore-based virtual asset service providers (VASPs) that carry out business overseas or locally are now regulated under anti-money laundering (AML) and counter-terrorism financing guidelines (CFT).
India exchanges circumventing restrictions
Several cryptocurrency exchanges in India are facilitating peer-to-peer transactions to circumvent restrictions imposed on traditional payments systems.
Mainstream banks have cut ties with crypto platforms, and Indian businesses are having to deal with new taxes on crypto transactions from the start of July.
Sitharaman justified the new crypto taxation regime by stating, “We were trying to make sure that we are keeping our trail and also making sure these are going to be eventually compliant with anti-money laundering rules. And making sure that these kinds of operations don’t end up inadvertently funding any kind of terror activities.”
It is estimated that India has 15 to 20 million crypto users. Sitharaman remarked that any regulation using technology will have to ensure that it is not behind the curve.