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Many developing nations differ from the developed countries over legitimising cryptocurrencies globally as a payment alternative because its cryptic and borderless nature could ultimately annihilate many sovereign currencies in the favour of the dollar, two people aware of the development said, citing possible talking points at the G20 summit.

The concern is shared globally and is among the key issues to be discussed at the G20, particularly under the Indian presidency, these people said, requesting anonymity.

“It is natural for the United States to back cryptocurrencies as they are based in that country, they wield tremendous influence, and they are mainly valued in US dollar, promoting dollarisation, which may not be acceptable for all countries. Hence, a comprehensive deliberation on this matter is expected at G20,” a senior official with direct knowledge of the matter said.

To be sure, cryptocurrencies follow a decentralised architecture – making their trading hard to control across jurisdictions even by the group of volunteers that govern most cryptocurrency development. Much of the control is exercised by exchanges, which are distributed across the world.

During her New Delhi visit on November 11, US treasury secretary Janet Yellen, without mentioning cryptocurrency, raised the issue of digital payment systems: “It is also clear that economic integration in the 21st century requires a modern international payments system. Cross-border payments should be cheaper than they are today. They should also be faster, more transparent, and easier to access. The G20 has set out a roadmap for enhancing cross-border payments. We look forward to working with India to deliver on tangible outcomes.”

A second official mentioned above said India is yet to take a view on this matter and that will be firmed up only after thorough deliberations. “One thing is quite clear, India will embrace technology. It is also in favour of digital payment system regulated by RBI [Reserve Bank of India]. But, RBI is against allowing any digital asset to replace the sovereign currency for country’s financial stability. Let’s see, what is the consensus at G20,” he said.

HT on October 31 reported that crypto-assets, including cryptocurrencies, are expected to be one of the key finance track agenda of G20 when India will assume its presidency in December 2022. On November 1, Union finance minister Nirmala Sitharaman said the issue pertaining to digital assets would be discussed at the G20.

Amanjot Malhotra, country head – India, Bitay said “a lot of regulations” are expected for crypto assets, especially after the FTX fiasco, a major cryptocurrency exchange of the world. He said “a different approach at the G20 summit” is expected on this matter by different countries.

FTX, the second-largest cryptocurrency exchange by volumes traded until recently, filed for bankruptcy earlier this month.

“Cryptocurrencies are looked upon differently by different countries. Developed countries like the US are trying to regulate it as an asset class as much as they can, which is great for both retail as well institutional investors. On the other hand, we have underdeveloped nations such as Nigeria, and El Salvador, and developing nations with weaker currencies trying to use them as a mode of transfer of value,” he said.

According to Anuj Chaudhary, associate director at CoinW Exchange, Bitcoin and other cryptocurrencies are already treated as digital assets in many countries. “Virtual digital assets (VDAs) as legitimate means of payment is still a far-fetched dream amid current volatility. The origin of VDAs does not lie in any one particular country – it’s borderless. That’s why the Indian government is seeking a globally synchronised crypto regulation. The Indian presidency at G20 could lay a foundation stone for the sustainable crypto policy,” he added.

For Rajagopal Menon, vice president at WazirX, cryptos can have a “transformative” effect in developing economies by increasing in financial inclusion. “Cryptos are a big hope for the unbanked masses. An internet connection is all you need to start participating in a formalized economy. Unlike India, most developing countries do not have the India stack comprising Jan Dhan, Aadhar, Mudra, and the UPI payment rails. Building such an ecosystem will take time and resources. Cryptos can easily bank the unbanked,” he said.

Archit Gupta, founder and CEO of Clear (formerly known as ClearTax) said: “In most of the world crypto has to be regulated and segregated on the utility or provides – payments, store of value, equity etc this way you can regulate each crypto on what it stands for and allow them to be used for those specific needs. Different utility tokens can be regulated based on their respective utility.”

“Cryptocurrency everywhere is used as a virtual currency and if used as ‘payments’ it could indeed undermine the sovereign currency if unregulated,” he added.