The Securities and Exchange Board of India (SEBI) has proposed a multi-regulator framework for cryptocurrency regulation to a government panel. Meanwhile, the Reserve Bank of India (RBI) has raised concerns about the macroeconomic risks associated with cryptocurrencies.
SEBI’s Multi-Regulator Proposal
SEBI recommends that various regulators oversee different aspects of cryptocurrency trade. This proposal suggests that the RBI, SEBI, the Insurance Regulatory and Development Authority of India (IRDAI), and the Pension Fund Regulatory and Development Authority (PFRDA) each play a role in regulating the crypto market.
- RBI: The central bank would regulate crypto assets backed by fiat currencies.
- SEBI: This watchdog would oversee cryptocurrencies resembling securities, manage initial coin offerings (ICOs), and issue licenses for equity market-related products.
- IRDAI and PFRDA: These bodies would oversee insurance and pension-related virtual assets.
- Consumer Protection: SEBI also suggests addressing investor grievances under India’s Consumer Protection Act.
Also Read: Binance Registers with Financial Intelligence Unit in India
RBI’s Concerns About Cryptocurrencies
Contrasting SEBI’s approach, the RBI views private digital currencies, such as bitcoin and ether, as significant macroeconomic risks. The central bank’s submission highlights concerns about:
- Tax Evasion: Cryptocurrencies could potentially facilitate tax evasion.
- Fiscal Stability: Decentralized peer-to-peer (P2P) transactions in cryptocurrencies rely on voluntary compliance, posing risks to fiscal stability.
Current Regulatory Landscape and Future Directions
India lacks a specific regulatory framework for cryptocurrencies. In 2021, a government panel drafted a bill to regulate digital assets, but it remains unintroduced. As the current G20 president, India has been advocating for a global regulatory framework for cryptocurrencies. The Financial Intelligence Unit – India (FIU-IND) oversees 47 cryptocurrency-related entities and has recently approved Binance and Kucoin as Virtual Asset Service Providers. In March, the Indian finance minister indicated that a regulatory framework for crypto might emerge from G20 discussions.
