Regulation
India to unveil crypto policy discussion paper by September
According to Economic Affairs Secretary Ajay Seth, India is set to come out with a discussion paper on its cryptocurrency policy by September to gather feedback from stakeholders on the proposed regulations for the growth of the cryptocurrency market.
Seth noted that cryptocurrencies in India are currently regulated primarily through Anti-Money Laundering (AML) and Counter-Terrorism (CTF) measures. However, the scope of regulation could potentially expand, as detailed in the upcoming discussion paper.
“So should the mandate be broader? What should the policy position be? That will all come out of the discussion paper,” Seth noted.
The policy document aims to initiate a public consultation process, inviting comments from various stakeholders. “The policy position is how you consult with relevant stakeholders, so it’s coming out and saying, here’s a discussion paper, these are the issues, and then stakeholders will give their views,” Seth explained.
In March 2023, India extended AML and CTF standards to cryptocurrencies and intermediaries, marking a significant regulatory step. The next document is being prepared by an inter-ministerial group, including the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi). Seth confirmed that this group is working diligently on a comprehensive policy framework for cryptocurrencies.
This move follows Sebi’s recommendation for more regulators to supervise cryptocurrency tradinga position that reflects a growing openness towards private virtual assets. However, the RBI has argued that private digital currencies pose macroeconomic risks.
India’s initiative to publish a discussion paper is in line with international guidelines. During India’s presidency of the G20, member countries approved the IMF-FSB summary documentwhich advises against banning cryptocurrency-related activities altogether, citing enforcement difficulties.
Reflecting on the G20 roadmap adopted adopted by finance ministers and central bank governors in October, Seth noted: “The roadmap provides a good framework for how each country should assess the risks to its economy and what it sees as a potential use case.”
Cryptocurrencies in India have been through a turbulent regulatory landscape. In April 2018, the RBI banned financial intermediaries from dealing with cryptocurrency users or exchanges, a ban that was later struck down by the Supreme Court in 2020. Although a bill proposing a ban on private cryptocurrencies was drafted in 2021, it has not yet been introduced.
As the discussion paper nears publication, the future of cryptocurrency regulation in India is at a critical juncture, with stakeholders anxiously awaiting the government’s next steps.