Cryptocurrencies cannot be recognised as sovereign currencies, both Center and RBI agreed.

The Centre agrees in principle with the Reserve Bank of India that cryptocurrencies cannot be treated as sovereign currencies, but it is not in favour of banning the blockchain technology that underpins cryptocurrencies due to its potential to boost the fintech industry, according to two officials familiar with the development.

Instead of outright outlawing a futuristic technology, “Blockchain technology can be controlled to promote its use in a variety of noncontroversial products and services,” one of them argued.

This topic is expected to be tackled at the first G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under the G20 Indian Presidency, which is slated for February 24-25 in Bengaluru.

“There are three broad aspects related to cryptocurrencies: crypto currencies, crypto assets, and blockchain technology,” a second official explained. “While many nations oppose granting legitimacy to cryptocurrencies such as Bitcoins to compete with sovereign fiat money, they are quite open to discussing the other two.” Neither desired identification.

After delivering her traditional post-budget address to the RBI board on February 11 in the nation’s capital, Union finance minister Nirmala Sitharaman stated that the G20 is contemplating whether crypto assets should be regulated and, if so, a single framework for such monitoring. 72 participants will attend the FMCBG meeting, including finance ministers and central bank governors of G20 members, invitees, and heads of multilateral organisations.

According to the second official, the Reserve Bank of India (RBI) has already voiced its concerns on the negative impact of cryptocurrencies on the Indian economy. The government, however, feels that any unilateral ban or regulation would be ineffective due to the cryptic and borderless nature of cryptocurrencies, and that international collaboration is required to prevent regulatory arbitrage, according to this individual.

Sitharaman and RBI Governor Shaktikanta Das will preside over the FMCBG meeting in Bengaluru. It will be preceded on February 22, 2023, by a meeting of G20 Finance and Central Bank Deputies (FCBD) co-chaired by economic affairs secretary Ajay Seth and RBI deputy governor Michael D. Patra.

The FCBD meeting will be inaugurated by the Minister of Information and Broadcasting and the Minister of Youth Affairs and Sports.

The FMCBG meeting, spanning three sessions on February 24 and 25, will cover topics such as strengthening multilateral development banks, financing for resilient, inclusive, and sustainable “cities of the future,” and leveraging Digital Public Infrastructure (DPI) for advancing financial inclusion and productivity gains.

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