SEBI Urges Local Oversight of Crypto Trading

The Securities and Exchange Board of India (SEBI) has proposed a framework where multiple regulators would collectively oversee cryptocurrency trading within the nation. Instead of having a single unified regulator, the idea is for different financial authorities to manage their respective areas of expertise. This information comes from recently revealed documents reviewed by Reuters.

These documents outline that a specialized team within India’s financial authorities should be responsible for the regulatory supervision of digital assets. Specifically, the SEBI recommends that different regulatory bodies handle various aspects of digital assets. For example, SEBI itself would manage digital assets identified as securities and oversee initial coin offerings (ICOs). SEBI would be responsible for issuing licenses for financial products related to digital assets.

The Reserve Bank of India (RBI) presented its own separate document, expressing concerns that digital currencies pose a macroeconomic risk to India. This stance shows a more cautious approach, with the RBI favoring strict regulations. The information has been submitted to a panel that provides policy advice to India’s finance ministry, adding another layer to the evolving regulatory landscape for digital currencies in the country.

The proposed multi-regulator framework suggests that the RBI should monitor stablecoins backed by fiat currencies. Insurance products related to cryptocurrencies would fall under the jurisdiction of the Insurance Regulatory and Development Authority of India (IRDAI). The Pension Fund Regulatory and Development Authority (PFRDA) would tackle pension issues tied to digital assets, ensuring a broad-based regulatory approach.

In terms of consumer protection, the proposal includes applying India’s Consumer Protection Act to handle disputes between investors and service providers in the crypto space. This move aims to ensure that investor interests are safeguarded under established legal frameworks, thereby providing additional layers of security and trust in the emerging market.

The Reserve Bank of India, Maintains a notably skeptical perspective on cryptocurrencies. Reliable sources indicate that the RBI backs the idea of banning stablecoins outright, citing concerns over tax evasion facilitated by digital assets. The central bank contends that decentralized, peer-to-peer (P2P) crypto transactions depend largely on voluntary compliance, posing significant risks to fiscal stability. The RBI warns that cryptocurrencies could lead to a reduction in income from the creation of money, a traditional role reserved for central banks.

India has been actively working to update its regulatory approach to include digital assets in its legal framework. The country took significant actions in December 2023, issuing 15 noncompliance notices to foreign crypto exchanges and restricting access to these platforms by blocking their URLs and mobile apps for local users. Currently, only KuCoin and Binance have managed to secure licenses from the Financial Intelligence Unit (FIU) to resume their operations in India.

Recently, the Indian government has also called upon the members of the G20 to collaborate in creating a unified regulatory approach to digital assets. This appeal underscores India’s proactive stance in fostering an international consensus on regulating the rapidly growing digital currency market, reflecting the global nature of these financial innovations.