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India’s Chief Economic Advisor, V. Anantha Nageswaran, has urged regulators to support innovation in cryptocurrency while ensuring transparency and public accountability. Speaking at the Global Economic Policy Forum 2024, Nageswaran emphasized that regulators must not hinder advancements in digital assets like Bitcoin.
“We need to ensure that the criteria set for regulators do not obstruct innovation,” Nageswaran remarked. He underlined the importance of aligning regulatory actions with societal goals, particularly in a country where financial literacy remains a significant challenge.
Nageswaran advocated for transparency, calling on regulators to actively share information and adhere to principles of social cost-benefit analysis. He argued that these principles, essential for financial innovations, should also govern regulatory frameworks. By striking this balance, regulators can facilitate progress in emerging sectors like cryptocurrency without jeopardizing public trust.
India’s cryptocurrency sector has been grappling with regulatory ambiguity, as policymakers remain divided on their approach. A long-anticipated policy paper meant to clarify the legal status of cryptocurrencies has faced repeated delays. Much of the government’s focus has shifted to the development and testing of its central bank digital currency (CBDC), the digital rupee.
Meanwhile, the Reserve Bank of India (RBI) has maintained its cautious stance on private cryptocurrencies. Concerns about financial stability and investor risks have led the central bank to advocate for stricter controls, with some reports suggesting it favors an outright ban.
Nageswaran’s comments highlight the need for a nuanced approach. He emphasized that regulators must recognize the limits of their unelected powers while fostering an environment conducive to innovation. “The same principles of transparency and social cost-benefit that apply to financial innovations must also apply to regulators themselves,” he stated.
As India explores the potential of digital assets and CBDCs, Nageswaran’s insights offer a roadmap for balancing innovation with accountability, ensuring that progress in the cryptocurrency sector benefits society at large.