India’s market regulator, the Securities and Exchange Board of India (SEBI), has underscored the necessity for instant settlement in traditional markets to maintain competitiveness with cryptocurrencies. SEBI’s chairperson, Madhabi Puri Buch, emphasized that without the capabilities for tokenization and instantaneous settlement, investors might pivot to the crypto market. This statement comes as SEBI announces plans to implement same-day settlement cycles, positioning India as a frontrunner in settlement speed alongside China.
Embracing Speed in Settlements
The call for instant settlements is a direct response to the growing appeal of cryptocurrencies, known for their immediate transaction capabilities. SEBI’s plan to introduce same-day settlements from March 28 on an optional basis marks a significant shift towards enhancing the efficiency of India’s regulated markets. This move aims to mitigate the risk of investors moving their focus to crypto spaces, attracted by the lure of instant transactions.
India Leads in Settlement Innovation
India’s initiative to adopt a same-day settlement cycle, becoming the second country to do so, demonstrates a proactive approach to keeping its financial markets competitive. The broader strategy includes transitioning to instant settlement by March 2025, pending approval from SEBI’s board. This ambitious plan reflects a recognition of the changing expectations among investors, who increasingly demand immediacy in their financial transactions.
Challenges and Criticisms
The transition to faster settlement cycles has not been without its challenges, particularly for foreign portfolio investors who face operational hurdles in aligning with the new requirements. Despite these obstacles, SEBI’s push for quicker settlements is seen as a necessary evolution to prevent a migration of investors to the unregulated realm of cryptocurrencies.
The Broader Context
SEBI’s focus on enhancing settlement speeds comes at a time when cryptocurrencies, particularly Bitcoin, have seen significant price surges, reaching all-time highs. While SEBI has traditionally maintained a cautious stance towards cryptocurrencies, the Reserve Bank of India has been openly critical, advocating instead for the development of central bank digital currencies. This strategic move by SEBI, under the guidance of India’s finance ministry, aligns with global efforts to frame a consensus on cryptocurrency regulation.
The initiative to accelerate settlement times signals a pivotal moment in India’s financial market, acknowledging the growing competition from cryptocurrencies and the imperative to adapt to the digital age’s demands.
