India’s SEBI, the Securities and Exchange Board of India, has put forward a proposal for regulators to collaborate in overseeing cryptocurrency trading. This marks a significant shift in India’s approach to private virtual assets. However, the Reserve Bank of India (RBI) remains concerned about the macroeconomic risks posed by private digital currencies and has called for a ban on stablecoins.
SEBI’s proposition suggests that different regulators should oversee cryptocurrency-related activities within their respective domains, rather than having a single unified regulator for digital assets. SEBI would be responsible for monitoring cryptocurrencies categorized as securities and Initial Coin Offerings (ICOs), as well as issuing licenses for equity market-related products. The Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA) would regulate virtual assets related to insurance and pensions. The proposal also emphasizes the importance of resolving investor grievances under India’s Consumer Protection Act.
In contrast, the RBI has taken a staunch anti-crypto stance since 2018 when it prohibited lenders and financial intermediaries from dealing with crypto users or exchanges. However, this move was overturned by the Supreme Court. In 2021, the government prepared a bill to ban cryptocurrencies, although it has yet to be introduced. As the president of the G20 in 2023, India called for a global framework to regulate digital assets. The RBI remains in favor of banning stablecoins due to concerns about their potential macroeconomic risks, particularly those linked to economies like the US and Europe.
The RBI’s Deputy Governor, T. Rabi Sankar, expressed caution about allowing these types of instruments, citing their threat to policy sovereignty based on past experiences in other countries. The RBI also raised concerns about tax evasion and peer-to-peer decentralized activities that rely on voluntary compliance. Additionally, it expressed worries about the loss of income from money creation, known as “seigniorage.”
Despite the RBI’s reservations, cryptocurrency trading has continued in India, leading the government to introduce a crypto tax in 2022. All exchanges were also required to register locally to facilitate crypto transactions. The panel tasked with formulating policy for the finance ministry is expected to submit its report by June, although no public announcement has been made.
