FameEX Hot Topics | India's SEBI Proposes Local Regulators Supervise Crypto Trading

The Securities and Exchange Board of India (SEBI) has put forward a proposal, as revealed by documents recently accessed by Reuters, suggesting that cryptocurrency trading in India should be overseen by multiple regulatory bodies. This initiative is part of a broader vision for diversified oversight within the financial sector of India, indicating a more segmented approach to the regulation of digital assets.

Presented to a panel that advises India's finance ministry, SEBI's proposal recommends a sectorial regulatory framework for cryptocurrencies, moving away from the centralized model of a single regulatory body. This structure aims to allocate regulatory duties across various authorities, each handling aspects relevant to their specific regulatory scope.

Specifically, SEBI proposes to take charge of regulating digital assets recognized as securities, alongside managing initial coin offerings and the licensing of related financial products. Concurrently, the Reserve Bank of India (RBI) would oversee the regulation of fiat-backed stablecoins. The distribution of responsibilities would extend further, with the Insurance Regulatory and Development Authority of India tasked with handling crypto-related insurance matters, and the Pension Fund Regulatory and Development Authority overseeing pension-related issues with digital assets. Additionally, the Consumer Protection Act would be applied to investor disputes.

Contrasting with SEBI’s proactive regulatory framework, the RBI adopts a more conservative approach towards cryptocurrencies. It favors a ban on stablecoins and expresses concerns about digital currencies potentially facilitating tax evasion. The RBI warns that the decentralized nature of peer-to-peer cryptocurrency transactions, which depend heavily on voluntary compliance, poses risks to fiscal stability. Furthermore, the RBI contends that the widespread adoption of cryptocurrencies could significantly impact central banks' revenue from money creation.

This evolving regulatory stance is underscored by actions taken in December 2023, when India issued 15 notices of noncompliance to foreign crypto exchanges. These actions, which included blocking URLs and mobile applications of the implicated firms, restricted their operations within India. These measures are part of India's ongoing strategy to adapt its regulatory framework to better include digital assets, reflecting a commitment to both safeguarding against risks and supporting the development of new technological investments within the country.

Overall, India's regulatory approach to cryptocurrencies is increasingly characterized by an effort to balance risk management with the fostering of innovation, adapting to the complexities of digital asset integration into the financial landscape while ensuring compliance and protection for investors.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.