India is gearing up for a significant move in its crypto regulation effort as the Department of Economic Affairs (DEA) prepares to release a crucial consultation paper between September and October 2024. This document is expected to serve as a cornerstone for shaping the country’s future approach to digital currencies. Some sources have revealed the government’s intent to actively engage stakeholders and refine its regulatory stance.
India Seeks Public Input For Crypto Regulation
The upcoming paper will seek feedback from various stakeholders. This reflecting the government’s commitment to creating a strong framework for crypto regulation. Moreover, the initiative aligns with the broader global effort, particularly within the G20, to establish a unified approach to regulating these assets.
In October 2023, Finance Minister Nirmala Sitharaman highlighted the G20’s consensus on the need for coordinated regulation across countries. She emphasized that while global cooperation is essential, each country must also tailor its legislative measures to address local challenges.
“Given the understanding that globally now all of us are on the same page about how regulations can happen, countries and their specific legislative arrangements will also have to be worked out,” Sitharaman stated. Her remarks underscore the dual approach India is taking. It includes working in align with international bodies while also addressing domestic regulatory needs.
The DEA’s paper will be instrumental in gathering insights and opinions on how to effectively regulate crypto assets in India, according to a CNBC report. Economic Affairs Secretary Ajay Seth, in an interview in September 2023, noted that the government would carefully consider the recommendations before finalizing its policy direction.
Seth also emphasized the importance of addressing the unique risks that cryptocurrencies pose to emerging economies like India. Seth’s comments come against the backdrop of India’s evolving stance on cryptocurrency regulation.
In 2023, during its G20 presidency, India played a pivotal role in endorsing guidelines from the International Monetary Fund (IMF) and the Financial Stability Board (FSB), which advise against blanket bans on crypto activities. These guidelines have influenced India’s current regulatory approach.
Current Regulation & Divergent Views Of Authorities
The country currently focuses on anti-money laundering (AML) and counter-terror financing (CTF) measures, extended to crypto assets and intermediaries since March 2023. Furthermore, the upcoming consultation paper will address key policy questions, including the scope and extent of regulation in the crypto space.
The latest update comes at a time when Indian authorities are grappling with differing views on how to handle private virtual asset trading. The Securities and Exchange Board of India (SEBI) is reportedly more open to allowing such activities. Meanwhile, the Reserve Bank of India (RBI) remains cautious, citing concerns about potential macroeconomic risks.
This internal debate is not new. India’s approach to cryptocurrencies has seen several shifts since the Supreme Court’s 2020 decision to overturn the RBI’s 2018 ban on crypto-related financial services. A bill proposing a ban on private cryptocurrencies was drafted in 2021 but was never introduced, signaling the government’s cautious stance.
However, recent developments suggest a move towards a more nuanced regulatory framework. In July 2024, the RBI and SEBI joined forces with other government bodies to work on a comprehensive crypto policy for India. Furthermore, netizens expect the DEA’s upcoming consultation paper to reflect the G20-endorsed IMF-FSB framework. This marks a significant step towards a balanced and inclusive approach to crypto regulation.
Also, it’s important to note that the latest decision comes amid a critical juncture as the largest Indian crypto exchange, WazirX, faced a hack recently. On July 18, WazirX faced a $230 million security breach. Currently, investigations are underway but WazirX received a “clean chit” via a recent forensic report.
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