The Securities and Exchange Board of India (SEBI) has proposed a collaborative effort among regulators to oversee cryptocurrency trading, a departure from the previous tough stance adopted by India on cryptocurrencies. SEBI recommended that various regulators oversee different aspects of cryptocurrency-related activities falling under their domain, with SEBI monitoring securities and Initial Coin Offerings (ICOs). The proposal suggested avoiding a single unified regulator for digital assets, akin to the approach taken by the Securities and Exchange Commission (SEC) in the United States. Additionally, the proposal recommended that the Insurance Regulatory Authority and Pension Fund Regulatory Authority regulate virtual assets related to insurance and pensions, respectively.
In contrast to SEBI’s collaborative approach, the Reserve Bank of India (RBI) has continued to take a tough stance on cryptocurrencies, advocating for a ban on stablecoins. The RBI views private digital currencies as a potential macroeconomic risk, especially stablecoins linked to economies like the US and Europe. The RBI Deputy Governor T. Rabi Sankar expressed concerns about allowing such instruments, citing risks of destabilizing policy sovereignty based on experiences in other countries. The RBI highlighted additional concerns about tax evasion, peer-to-peer decentralized activities, and losing income from money creation, known as “seigniorage.” Despite the Supreme Court overturning the RBI’s 2018 orders, the central bank maintains its stance on excluding cryptocurrencies from India’s financial system.
In recent years, India has displayed a cautious approach to cryptocurrencies, with the government banning lenders and financial intermediaries from dealing with crypto users in 2018. However, the Supreme Court later overturned this ban. In 2021, a bill was prepared to ban cryptocurrencies, though it has not been introduced. The country, while presiding over the G20 in 2023, called for a global framework to regulate digital assets. The government also introduced a crypto tax in 2022 and mandated all exchanges to register locally for facilitating crypto transactions. Despite these moves, concerns persist about cryptocurrency trading, prompting the creation of a government panel tasked with formulating policies for the finance ministry to consider.
SEBI’s proposal to oversee cryptocurrency trading represents a shift towards openness and collaboration in regulating digital assets, which has not been seen in India previously. The suggestion for various regulators to monitor different aspects of cryptocurrency-related activities echoes the approach taken by regulatory bodies in countries like the United States. The RBI’s continued advocacy for a ban on stablecoins highlights ongoing concerns about the macroeconomic risks associated with private digital currencies. As the debate on cryptocurrency regulation in India continues, it remains to be seen how the government panel will navigate the complexities of overseeing the cryptocurrency market and balancing regulatory oversight with innovation in the digital asset space.
