The Aryavarth Express
Agency (New Delhi): India’s Securities and Exchange Board of India (SEBI) has proposed that multiple regulators oversee cryptocurrency trade, marking a significant divergence from the Reserve Bank of India (RBI)’s more cautious approach. SEBI’s recommendation is a strong signal that some Indian authorities are open to private virtual assets.
The SEBI’s stance contrasts sharply with that of the RBI, which views private digital currencies as a macroeconomic risk. Both organizations have submitted their positions to a government panel responsible for crafting cryptocurrency policy for the finance ministry’s consideration. SEBI’s support for regulatory oversight over cryptocurrencies had not been previously reported.
India has maintained a stringent stance on cryptocurrencies since 2018, when the RBI barred financial institutions from dealing with crypto users and exchanges, a move later overturned by the Supreme Court. In 2021, the government drafted a bill to ban private cryptocurrencies, though it has not been introduced. During its G20 presidency last year, India advocated for a global regulatory framework for these assets.
Despite the RBI’s push for a stablecoin ban, SEBI has suggested a more nuanced approach. It recommended that different regulators oversee cryptocurrency activities within their respective domains, avoiding a single unified regulator for digital assets.
SEBI proposed that it could monitor cryptocurrencies resembling securities, including Initial Coin Offerings (ICOs), and issue licenses for equity market-related products. This approach mirrors the U.S. system, where the Securities and Exchange Commission (SEC) regulates tokens and crypto exchanges.
Cryptocurrencies backed by fiat currencies could fall under the RBI’s regulation. Additionally, the Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA) would oversee insurance and pension-related virtual assets. SEBI also recommended that investor grievances related to cryptocurrency trading be addressed under India’s Consumer Protection Act.
The RBI, in its submissions, highlighted risks associated with cryptocurrencies, including potential tax evasion and threats to fiscal stability due to decentralized peer-to-peer (P2P) transactions. It also expressed concerns about losing “seigniorage” income, the profit from money creation.
After the Supreme Court overturned the RBI’s 2018 ban, the central bank mandated strict compliance with anti-money laundering and foreign exchange rules, effectively sidelining cryptocurrencies from India’s formal financial system. Despite this, cryptocurrency trade continued to flourish. In response, the government introduced a tax on crypto transactions in 2022 and required exchanges to register locally.
A December report by PwC indicated that 31 countries have regulations allowing for cryptocurrency trade, reflecting a global trend toward formalizing the sector.
