At the moment, India’s regulations surrounding cryptocurrencies are mostly focused on counterterrorism financing (CTF) and anti-money laundering (AML).
Ajay Seth, the Economic Affairs Secretary, said that India will publish a discussion paper by September detailing its policy position on cryptocurrencies. The purpose of this project is to get input from pertinent parties regarding the suggested legal framework for cryptocurrencies in the nation. The upcoming discussion paper will examine existing constraints and solicit feedback on the scope of bitcoin legislation in India.
In an interview with Moneycontrol, Seth mentioned that anti-money laundering (AML) and counter-terror financing (CTF) regulations currently govern cryptocurrencies in India. Should the scope of regulation be expanded beyond that point, as it cannot extend further? What position should the policy take? The discussion paper will contain all of that information.”
India expanded the scope of CTF and AML regulations to cover cryptoassets and intermediaries in March 2023. A more comprehensive strategy for cryptocurrencies is presently being developed by an inter-ministerial group that comprises the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI). An interministerial panel is now investigating a more comprehensive cryptocurrency policy. Before September, we hope to release the discussion paper,” Seth continued.
The choice to write a discussion paper came about as a result of the G20 member nations endorsing the principles during India’s leadership last year. The Financial Stability Board (FSB) and the International Monetary Fund (IMF) developed these guidelines, which recommended against a complete prohibition on cryptocurrency activities because they were deemed unfeasible.
Seth emphasised the significance of the G20’s established roadmap, which offers a structure for evaluating the risks and possible applications of cryptocurrencies. This approach is probably going to have an impact on how India’s discussion paper develops.
What Does the Paper Expect To Present?
The purpose of the paper is to introduce concerns to stakeholders and solicit their opinions in order to start a conversation. This strategy is consistent with a story by Reuters earlier this year, which stated that Sebi has proposed that many regulators supervise the trading of cryptocurrencies, indicating the willingness of certain authorities to allow private virtual assets. On the other hand, the RBI has voiced worries over the macroeconomic dangers that private digital currencies provide.
By obtaining feedback from different stakeholders, a balanced regulatory framework may be able to be created. India’s focus on cryptocurrencies is currently on AML and CTF regulations, but Edul Patel, CEO of Mudrex, told ABP Live that “a wider mandate is definitely needed to expand the scope to include consumer protection, market integrity, and innovation that can ensure responsible growth.” “The interministerial group’s decision to include RBI and SEBI indicates a cooperative effort that strikes a balance between innovation and risk mitigation. We eagerly await the September publication of the paper.”
Ashish Singhal, a co-founder of CoinSwitch, stated, “We look forward to reading the fine print and contributing to robust cryptoasset regulations focused on consumer protection and innovation in India.”
Significant progress has been made in India’s regulation of cryptocurrencies, notably the central bank’s 2018 ban on financial institutions working with cryptocurrency users or exchanges, which was later overturned by the Supreme Court in 2020. The government attempted to submit a bill in 2021 that would have prohibited private cryptocurrency use, but it was never passed.