IMF chief economist Gita Gopinath said work needs to be done with cryptocurrencies rather than putting a ban on them. Photo: AFP / Andrew Caballero-Reynolds

International Monetary Fund (IMF) chief economist Gita Gopinath, speaking in India at a lecture organized by a think-tank, said cryptocurrencies posed a challenge to emerging markets, but she ruled out an outright ban on them.

At a lecture organized by the National Council for Applied Economic Research, a New Delhi-based think-tank, she said there were practical obstacles to banning cryptocurrencies, given their decentralized nature.

Instead, she called on countries to urgently formulate a global action plan to regulate cryptocurrencies, as an individual country cannot do this on its own.

“Regulation is absolutely important for this sector. If people are using this as an investment asset, then the rules which are there for other investment classes should apply here as well,” Gopinath said.

Her statement comes from the backdrop of the Indian government trying to formulate a law on cryptocurrencies. While the government had listed the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 for tabling and passage in the current Winter Session, it has not been tabled yet.

The Union Cabinet has not taken up the bill for consideration and with the current Winter Session ending on December 23, it is now unlikely to be tabled, the Business Standard reported.

The virtual currencies have sparked a heated debate in the country. On the one hand, the Reserve Bank of India continues to oppose cryptocurrencies as it feels they do not function under any regulatory framework laid down by any central bank, and Governor Shaktikanta Das has repeatedly warned they could upset the country’s macroeconomic and financial stability.

On the other hand, the country’s cryptocurrency industry has urged the government to take a nuanced approach towards regulating crypto assets in India. They hope the proposed bill would accommodate the aspirations of Indian crypto owners, Indian crypto entrepreneurs and investors.

According to some estimates from various cryptocurrency exchanges, about 20 million Indians hold investments in the sector worth around 150-200 billion rupees. Many in the government believe that given the rapid rise of the sector, it needs urgent regulation.

Despite the uncertainties surrounding the industry, crypto startups are able to attract funding and two exchanges, CoinDCX and CoinSwitch Kuber, have enterer the elite unicorn club.