The Securities and Exchange Board of India (SEBI) has put forward a proposal that recommends the involvement of multiple regulators in overseeing cryptocurrency trading in India, according to recently disclosed documents reviewed by Reuters.
The documents suggest that a division within India’s financial authorities should be responsible for regulatory oversight. Meanwhile, the Reserve Bank of India (RBI) argues in a separate document that digital currencies pose a macroeconomic risk to the country.
Government officials have submitted these documents to a panel tasked with providing advice to the finance ministry on policy matters, Reuters reported.
Instead of having a single unified regulator overseeing digital assets, SEBI proposes that different regulators collectively monitor digital asset activities falling under their respective jurisdictions.
Under this framework, SEBI would oversee digital assets classified as securities, initial coin offerings, and issue licenses for financial products. The Reserve Bank would have oversight over fiat-backed stablecoins.
Crypto-related insurance would fall under the jurisdiction of the Insurance Regulatory and Development Authority of India, while the Pension Fund Regulatory and Development Authority would regulate pension matters related to digital assets. Disputes between investors would be resolved under the Consumer Protection Act of India.
The RBI takes a more cautious view of cryptocurrencies. Sources familiar with the matter indicate that the RBI supports the idea of banning stablecoins. The agency also raises concerns about digital assets facilitating tax evasion and highlights the risks to fiscal stability associated with decentralized peer-to-peer transactions in cryptocurrencies, which rely on voluntary compliance.
Furthermore, the RBI believes that cryptocurrencies could lead to a loss of income from money creation for central banks.
India has been working on adjusting its regulatory framework to incorporate digital assets. In December 2023, the country issued 15 notices of noncompliance to foreign crypto exchanges, resulting in the blocking of these platforms’ URLs and mobile applications for local users.
As of now, KuCoin and Binance are the only exchanges that have obtained licenses from the Financial Intelligence Unit, allowing them to resume operations. The Indian government has recently called on G20 members to collaborate in the regulation of digital assets.
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