India’s Secretary of Economic Affairs, Shri Ajay Seth, has announced the government’s plan to release a discussion paper on crypto policy by September 2024. Reports say this Indian crypto policy paper is designed to gather crucial stakeholder input and develop a comprehensive regulatory framework. With the global crypto market evolving rapidly, the paper aims to provide much-needed clarity and direction for India’s approach to digital currencies. It seeks to capture diverse perspectives, which is essential for formulating policies that align with domestic priorities and international standards. This initiative marks a significant step towards a more structured and transparent crypto ecosystem in India.
Different Perspectives of the Central Bank and SEBI
The Reserve Bank of India has been rigid in its stand against legitimising Cryptocurrencies. The central bank’s main concern is the risk to macroeconomic stability. Officials with the RSV have been citing that since cryptocurrencies remain unregulated, they can create a system of financial instability and pose massive threats to the present financial system. It is precisely for this reason, as a measure of caution, that the central bank is leading the charge for a blanket prohibition on cryptocurrencies and stablecoins, with the central argument that their integration could undermine the financial system or lead to problems such as money laundering and financing of terrorism.
On the other side, SEBI takes a somewhat regulatory-oriented approach. It will see that the cryptocurrency sector can indeed be effectively regulated with the right measures in place. The board has suggested that multiple authorities need to oversee cryptocurrency trading to ensure a robust regulatory framework. That SEBI, therefore, is willing to regulate rather than ban cryptocurrencies exhibits a far more forward-looking approach that seeks to leverage the power of blockchain technology while taming its risks. Indeed, what comes out from these two major regulatory bodies is sharply differing views on what an Indian crypto policy should look like—a telling tale of the complexity and challenges involved in its formulation.
Current Indian Crypto Policy and Future Steps
Currently, there is no comprehensive legislation on cryptocurrencies in India. Still, the government has put strict tax and registration requirements in place to bring accountability to the sector. Companies that operate with cryptocurrencies must register with the Financial Intelligence Unit (FIU-IND) to comply with the anti-money laundering (AML) and counterterrorism-financing (CFT) standards of the Financial Action Task Force (FATF). This is to build credibility for the cryptocurrency sector and make it work within the law and financial requirements.
The current regime’s largely AML and EFT compliance-oriented nature creates a need to broaden its reach to the cryptocurrency market. The objective of the forthcoming discussion paper will be to outline possible policy directions and elicit responses from a wide range of stakeholders, including the financial community, industry leaders, and the general public. This participative approach will surely result in a more comprehensive and inclusive Indian crypto policy that mirrors the different viewpoints and interests within the country.
India’s Global Stance and Future Plans
India will want to frame its Indian crypto policy in line with the global stance on cryptocurrency regulation. Ajay Seth announced in September 2023 that during its G20 presidency, “the country will examine its position relating to cryptocurrencies to arrive at consensus-based global rules”. Such a review is needed to align the country’s policies with international standards to remain competitive and compliant on the global financial platform.
The Indian crypto policy, to be informed by the stakeholder participation, will more explicitly stipulate India’s stance on the future of cryptocurrencies. This discussion paper, to be published by September 2024, would be a serious contribution toward that direction. From a participative and globally informed process, India is pursuing a well-balanced and effective regulatory framework that can sustain innovation while assuring financial stability and security.
This is a developing story; frequent updates and in-depth insights can be found on TurkishNY Radio. Keep tabs on the latest news and analysis of cryptocurrency policies and developments in India and worldwide.
