In a significant development within India’s crypto landscape, the Securities and Exchange Board of India (SEBI) has recommended the involvement of several regulators to oversee crypto trade nationwide. This move has sparked considerable interest within India’s crypto community, given the RBI’s historically strict control over digital assets.
Since 2018, the Reserve Bank of India (RBI) has maintained strict control over cryptocurrencies, forbidding banks and other regulated entities from facilitating crypto transactions. However, SEBI’s recent proposal for a multi-regulator approach to oversee crypto trading has injected a sense of anticipation into the market.
Reacting to this development, Edul Patel, CEO of Mudrex, expressed optimism, stating, “SEBI’s proposal for multiple regulators to oversee the Virtual Digital Assets (VDAs) sector represents a balanced and pragmatic approach. This move can ensure comprehensive oversight by leveraging the expertise of various financial authorities, thereby enhancing regulatory clarity. It is a progressive stance that acknowledges the multifaceted nature of VDAs. Moreover, it can help in building investor confidence, as a well-regulated environment reduces the likelihood of market abuses and enhances the overall integrity of the ecosystem.“
Similarly, Ashish Singhal, Co-founder of CoinSwitch, shared his views, highlighting SEBI’s potential role in fostering a conducive regulatory environment for crypto. He said, “Encouraging views on crypto from the Securities and Exchange Board of India (SEBI), which has overseen India’s thriving stock markets. An enabling regulatory environment has paved the way for greater consumer adoption in several other sectors in the past, such as telecom, information technology, e-commerce, etc. This is a start, and many nuances will need to be discussed. Nonetheless, great news for crypto in India.“
SEBI’s approach mirrors that of regulatory frameworks in countries like the United States, where oversight extends to crypto assets categorized as securities, as well as emerging offerings such as Initial Coin Offerings (ICOs).
RBI’s Concerns
In its submissions, the RBI highlighted several risks associated with cryptocurrencies. It argued that cryptocurrencies could lead to tax evasion and that decentralized peer-to-peer (P2P) activities in cryptocurrencies would rely on voluntary compliance, both representing risks to fiscal stability. Additionally, the RBI expressed concerns that cryptocurrencies might lead to the loss of “seigniorage” income, which is the profit earned by a central bank from money creation.
After the RBI’s 2018 orders were challenged by the industry and struck down by the Supreme Court, the central bank urged financial institutions to strictly comply with tough money laundering and foreign exchange rules, effectively keeping cryptocurrencies out of India’s formal financial system.
Despite these measures, crypto trade flourished, and in 2022, the government introduced a tax on crypto transactions in India to discourage such trading. This was followed by a mandate requiring all exchanges to register locally before facilitating crypto transactions from within the country.
According to a PwC report from December, 31 countries have regulations in place that allow for trade in cryptocurrencies.
