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India is on the brink of unveiling a major discussion paper that will outline its policy stance on cryptocurrencies, a move expected before September 2024. The decision, as reported by Indian news outlet Moneycontrol, is spearheaded by Ajay Seth, the country’s Economic Affairs Secretary. This forthcoming document will not only set the tone for Indian crypto policy but also highlight the government’s intent to seek broad-based consensus among key stakeholders, rather than rushing into comprehensive legislation.
Seth, in his interview with Moneycontrol, emphasized that the Indian crypto policy is being crafted with a focus on collaboration and input from various sectors. “The policy stance is about how we consult relevant stakeholders,” Seth explained. “We plan to bring the discussion paper to the forefront, present the key issues, and then invite views from all concerned parties.”
This methodical approach underscores India’s cautious stance in navigating the complexities of cryptocurrency regulation. The inter-ministerial group responsible for this initiative includes the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), both of which have played critical roles in shaping the nation’s financial landscape.
The Reserve Bank of India has consistently voiced its concerns about legitimizing cryptocurrencies, citing potential risks to macroeconomic stability. The RBI has been particularly wary of stablecoins and other digital assets, advocating for strict prohibitions. In contrast, SEBI has shown a more balanced view, recognizing the need for regulation without entirely dismissing the potential benefits of digital assets. SEBI’s recent comments suggest that the oversight of cryptocurrency trading could be shared across several authorities, ensuring a more robust regulatory framework.
This divergence in perspectives within India’s financial regulators highlights the complexity of forming a unified Indian crypto policy. The discussion paper is expected to address these concerns by fostering dialogue among stakeholders, potentially paving the way for a more balanced regulatory environment.
India has yet to implement comprehensive crypto legislation, though it has imposed stringent taxes on crypto transactions and introduced measures to ensure compliance with global anti-money laundering (AML) standards. Crypto entities in India are required to register with the Financial Intelligence Unit (FIU-IND) and adhere to regulations set by the Financial Action Task Force (FATF). This move has been seen as a shift towards greater credibility for the industry, even in the absence of full-fledged legislation.
Seth pointed out that, as of now, cryptocurrencies in India are regulated primarily from an AML and electronic funds transfer (EFT) perspective. “Regulation starts and ends there; it cannot be beyond that. So, should the remit be broader? What should be the policy stance? All of that will be outlined in the discussion paper,” he noted.
India’s position on cryptocurrency regulation is not being developed in isolation. As a key member of the Group of 20 (G20), India has been actively involved in global discussions on crypto regulation. During its G20 presidency, India emphasized the importance of a consensus-based approach to framing global crypto rules, reflecting its intent to align domestic policy with international standards.
In September 2023, Seth indicated that India would take a few months to analyze and decide on its own position regarding cryptocurrencies, after considering the approaches adopted by global leaders. This aligns with India’s broader strategy of cautiously advancing its crypto policy while ensuring that it is informed by international best practices to boost the economy and influence growth of investment in the Indian economy.
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