Ahead of G20 Summit, consensus seen to be emerging on crypto, capital adequacy framework for MDBs
The finance track of the G20 seems to have made considerable progress on a common regulatory framework for cryptocurrencies as well as reforms for multilateral development banks, both of which are expected to be taken up at the upcoming G20 Leaders’ Summit over the weekend.
According to highly placed sources, the G20 Summit is expected to take forward discussions on the way forward for regulating cryptocurrencies. The synthesis paper prepared by the International Monetary Fund and the Financial Stability Board has laid down a comprehensive roadmap and building blocks for regulating these assets. This will now be taken up for further discussion at the Summit on September 9 and 10.
“It will be taken up at the G20 Leaders’ Summit. Crypto currencies have huge implications on macro economic stability. Unless all countries come together to regulate these assets, it is not possible. Efforts of one country will not be adequate,” noted a source, adding that this has proved to be one of the biggest achievements for India’s G20 Presidency.
While the IMF has looked at macroeconomic risks from cryptocurrencies, the FSB paper has looked at regulatory aspects. The Indian team is also understood to have prepared a Presidential note on it. “The G20 will be looking at both the papers,” the source said, adding that there is expectation of a consensus on this.
MDBs
There is also likely to be forward movement on the reforms and strengthening of multilateral banks, in particular the recommendation on the capital adequacy framework. “MDBs are likely to implement the recommendation on the Capital Adequacy Framework, which will be one of the very strong outcomes of the Indian presidency,” the source noted. The CAF was developed based on based on the mandate from Leaders in Bali in November 2022 and updates from MDBs in earlier this year. Initial CAF measures could yield additional lending headroom of about $200 billion over the next decade.
There is also growing support for the overall reform of MDBs to articulate the voice of the Global South and it is likely to be discussed at the Leaders’ Summit. It will be taken forward once the second volume of the Independent Expert Group is submitted in October during the World Bank and IMF meetings.
“MDBs have been engaged to discuss the scope for implementing the recommendations within their respective organisations. We expect this will significantly enhance their strength,” the source explained.
Financial inclusion and digital public infra
There has also been progress on the use of digital public infrastructure for financial inclusion. India is the co chair for the Financial Inclusion Action Plan along with Italy and will give policy guidelines for G20 financial inclusion initiatives for the three year period from 2024 to 2026.
Managing global debt vulnerability
There has also been good progress in managing global debt vulnerability, which has been a key agenda of India’s G20 Presidency. Debt vulnerability of three countries including Zambia, Ghana and Ethiopia has been addressed under the common framework for debt treatment. Sri Lanka’s debt restructuring is being done outside the framework.
Differences
However, there remain differences in certain areas, said the source, noting that tying up climate issues to the debt restructuring is registering some pushback from China. Similarly, there has not been agreement with Russia on the issue of assessing the macroeconomic consequences of food and energy security. Sources indicated that this issue is likely to be taken up at the Leaders’ Summit.
Meanwhile, concerns of Saudi Arabia on transition measures to arrest climate change have been taken on board, the source further explained.
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