India might soon jump on the bandwagon of legalizing crypto. According to Economic Affairs Secretary Ajay Seth, India intends to release a discussion paper detailing its policy stance on cryptocurrencies before September, Moneycontrol was informed in an interview.
The discussion paper aims to get feedback on the concepts it presents from pertinent parties. According to Seth, this report would also include recommendations regarding the scope of cryptocurrency rules in India.
This new development comes after years of the Indian government’s and regulators’ hostile outlook towards the crypto sphere. Last year, while India held the G20 presidency, India decided to publish a discussion paper on cryptocurrencies in response to recommendations made by the Financial Stability Board (FSB) and the International Monetary Fund (IMF).
The IMF-FSB synthesis document advises against a complete prohibition on cryptocurrency activities, noting that it would be challenging to implement.
India crypto regulations to be private?
Reuters had previously said that documents revealed that the market watchdog in India had advised that multiple regulators supervise the trading of cryptocurrencies in the nation. This is the clearest indication to date that some Indian officials are amenable to permitting the usage of private virtual assets.
Additionally, separate records revealed that the Reserve Bank of India (RBI), which believes that private digital currencies pose a macroeconomic risk, holds a different stance than the Securities and Exchange Board of India (SEBI).
India’s hostile crypto stance
Since 2018, India has taken a firm stand against cryptocurrencies. The Supreme Court eventually overturned the central bank’s restriction on lenders and other financial intermediaries doing business with cryptocurrency users or exchanges.
Although it hasn’t been introduced, the government created a measure in 2021 that would have outlawed private cryptocurrencies. During its G20 presidency last year, India demanded the creation of an international framework to control these kinds of assets.
Additionally, India had previously banned several crypto exchanges and websites in the country, including the sector giant Binance.
With the recent development, the RBI might rely on blockchain technology to establish a regulatory presence in the cryptocurrency market. It might even think about granting licenses to cryptocurrency exchanges, which would only be possible after a suitable review of the records and after fulfilling all relevant compliance standards.
Additionally, a system that mandates that transaction records be submitted to the RBI within a predetermined window of time may be implemented. This will improve client protection while ensuring transaction security and reducing the likelihood of criminal use.
India’s cryptocurrency market will remain unregulated until a framework for regulation is developed. The Supreme Court’s ruling has boosted the cryptocurrency market, and Indian cryptocurrency start-ups are growing and introducing new products.
Still, there are worries because the finance ministry has reportedly proposed a bill to outlaw cryptocurrencies through interministerial consultations.
However, as they persistently plead with the government to refrain from enacting a complete prohibition, Bitcoin start-ups in India remain upbeat about the enormous potential and future of cryptocurrencies in India.
