The relationship between the UK and India has established crucial dynamics following the UK election and the selection of Rishi Sunak as the elected leader of the countries. The two nations are remarkably moving forward in various economic and financial spheres, and cryptocurrencies are the new and important entrant in the field.
Amidst this strengthening relationship between the two countries, India and the UK discussed international developments regarding crypto assets on Wednesday and focused on the importance of robust global approaches to deal with risks attached to this at the India-UK 2nd Financial Markets Dialogue. Importantly, this is the first in-person financial dialogue between both nations since 2017.
The participants from both countries provided updates on recent developments in their respective banking sectors, discussing banking trends, the insurance sector, and emerging vulnerabilities and risks in the sector.
During this dialogue, for dealing with the crypto ecosystem, both countries discussed the importance of the need for a secure and well-drafted global approach to deal with the risk attached to cryptocurrencies. The countries also focused on understanding the scope for augmenting knowledge of Central Banking Digital Currency (CBDC) through mutual learning.
Both nations also highlighted the threats related to cryptocurrencies, especially the lack of inherent and intrinsic value of cryptocurrencies. The recent collapse of the crypto exchange FTX stands as an important example.
The dialogue further included a discussion on notable advancements in the insurance sector, where the UK mentioned the country’s solvency reforms and ongoing consultation for introducing an insurer regulation regime, while the Indian side updated on the development in the regulatory sector, reforms in the sphere of ease of doing business, and encouraging new players in the sector.
Other important discussions revolved around providing effective regulation of ESG rating providers. Also, the commitment to continuing collaboration on opportunities offered by GIFT IFSC across verticals, including capital markets for dual listing, sustainable finance, fund management, and reinsurance, was reiterated.
Sustainable Finance was another important sphere of consultation for collaboration between the two countries. With the rising discussion among different countries for sustainable development, collaboration in the field of sovereign green bonds became a noteworthy point. It is important to mention that India, a few months back, started the sovereign green bond initiative. Governments issue sovereign green bonds to raise money for projects that deal with the environment or the climate. Apart from this, discussions also revolved around existing collaborations of the central banks, such as climate scenario analysis, capacity building, and awareness generation.
The interaction also tried to inspect the scope to leverage asset management industries in favor of deeper cross-border trade and investment. Participants also emphasized emerging areas for collaboration, including knowledge exchange on regulatory frameworks for pension funds (PFs) and potential investment opportunities by PFs. The meeting was co-chaired by Richard Knox, Director for International Financial Services at the Treasury Department, and Surbhi Jain, Joint Secretary of the Department of Economic Affairs.
This dialogue between the two countries marks a new phase of economic and financial systems across the globe since countries such as India and the UK are giving importance to cryptocurrencies and focusing on their use in the future. It is important to note here that both countries have different regulations and laws regarding cryptocurrencies. While on one hand, India started its CBDC program in a few cities to further understand its importance and use, the UK, on the other hand, is still skeptical about cryptocurrencies.
Thus, it is important in the contemporary global order to take strong steps for discussions and deliberations among different countries and draft foolproof laws for eliminating the misuse of cryptocurrencies and establishing strong regulations to make the crypto market a global market.
