India, UK Discuss Crypto Assets; Focus on Robust Approach to Handling Risks and Vulnerabilities

India and the UK on Wednesday discussed international developments regarding crypto assets and emphasised the importance of robust global approaches to deal with risks attached to this. At the India-UK 2nd Financial Markets Dialogue participants from both countries provided updates on recent developments in their respective banking sectors, discussing banking trends and emerging vulnerabilities and risks in the sector.

“Scope for augmenting knowledge on Central Banking Digital Currency (CBDC) through mutual learning was explored. Participants discussed international developments regarding crypto assets, and the importance of robust global approaches, and progress in delivering the G20 Roadmap,” the joint statement said.

The recent collapse of crypto exchange FTX and the ensuing sell-off in crypto markets have placed a spotlight on the vulnerabilities in the crypto ecosystem.

Crypto assets are self-referential instruments and do not strictly pass the test of being a financial asset because they have no intrinsic cash flows attached to them.

US regulators have disqualified Bitcoin, Ether and various other crypto assets as securities.

Participants discussed matters relating to the insurance sector, including UK updates on Solvency II reforms and a consultation on the introduction of an Insurer Regulation Regime (IRR), it said.

Indian participants updated on developments in the regulatory approach towards insurance in India, in favour of enhancing ease of doing business and encouraging entry of new players for deeper insurance penetration, it said.

The meeting co-chaired by Richard Knox, Director for International Financial Services at Treasury Department, and Surbhi Jain Joint Secretary, Department of Economic Affairs also explored the scope to leverage asset management industries in favour of deeper cross-border trade and investment.

Participants identified emerging areas for collaboration including knowledge exchange on regulatory frameworks for pension funds (PFs) in respective countries, potential investment opportunities by PFs and the development of ecosystems including technology-based solutions for Social Stock Exchange, it said.

Both sides discussed the possibility of further technical discussion on the effective regulation of ESG rating providers, it said, adding, commitment to continue collaboration on opportunities offered by GIFT IFSC across verticals including capital markets for dual listing, sustainable finance, fund management and re-insurance was re-iterated.

Sustainable Finance was also discussed including existing collaboration between central banks on climate scenario analysis and stress testing, as well as capacity building and spreading awareness on Climate Risk and Sustainable Finance.

Moreover, opportunities to collaborate around Sovereign Green Bonds would be explored, it said.

“Both sides agreed to engage bilaterally on these areas in the coming months with the government-led Sustainable Finance Forum in June to advance green cooperation followed by the ministerial Economic and Financial Dialogue (EFD) later in the year,” it said.

Following the government-to-government discussion, business leaders from the India-UK Financial Partnership (IUKFP) were invited to the discussion, it said.

Both governments welcomed the appointment of Bill Winters CBE, Group Chief Executive of Standard Chartered, as the new UK Chair of the IUKFP alongside Uday Kotak, managing director and CEO Kotak Mahindra Bank, as India Chair.

“Financial Cooperation is one of the key elements of the 2030 Roadmap adopted during the 2021 meeting of the two Prime Ministers.

“Both countries agreed there is significant scope for strengthened financial services cooperation between India and the UK, and agreed to hold the next Financial Markets Dialogue in India in 2024,” it said.