Recent documents disclosed by Reuters reveal that India’s Securities and Exchange Board (SEBI) has recommended a distributed regulatory approach for overseeing cryptocurrency trading within the country. The suggestion entails multiple regulators collectively monitoring different aspects of digital asset activities, according to the documents submitted to a panel advising the country’s finance ministry on policy.
Division of Regulatory Responsibilities of SEBI
SEBI’s proposal advocates for a division of regulatory oversight among various financial authorities in India. Under this framework, SEBI would monitor digital assets classified as securities and oversee initial coin offerings (ICOs), as well as issue licenses for financial products. Meanwhile, the Reserve Bank of India (RBI) would assume responsibility for supervising fiat-backed stablecoins.
Additionally, other regulatory bodies such as the Insurance Regulatory and Development Authority of India and the Pension Fund Regulatory and Development Authority would oversee crypto-related insurance and pension matters related to digital assets, respectively. Disputes between investors would be addressed under the purview of India’s Consumer Protection Act.
Read more: Wifi Dabba’s DePIN Initiative: Decentralizing Internet Access in India
RBI’s Skepticism and Regulatory Concerns
While SEBI advocates for a distributed regulatory model, the RBI holds a more skeptical view of cryptocurrencies. The central bank supports the notion of banning stablecoins and highlights concerns regarding the potential facilitation of tax evasion by digital assets. Moreover, the RBI expresses apprehension that decentralized peer-to-peer transactions in cryptocurrencies could undermine fiscal stability by relying on voluntary compliance.
Furthermore, the RBI warns of potential risks associated with cryptocurrencies, including the loss of income from money creation for central banks. Despite these concerns, India has been actively working on adjusting its regulatory framework to incorporate digital assets. Recent actions include issuing notices of noncompliance to foreign crypto exchanges and inviting members of the G20 to collaborate on digital asset regulation.
Conclusion
India’s approach to regulating cryptocurrency trading reflects a nuanced understanding of the complexities and risks associated with digital assets. By proposing a distributed regulatory oversight model, SEBI aims to ensure comprehensive monitoring while leveraging the expertise of various regulatory bodies. However, the RBI’s skepticism underscores the need for cautious and balanced regulation to address concerns and foster a conducive environment for the development of the digital asset market in India.
