India is set to release a discussion paper outlining its policy stance on cryptocurrencies before September, Department of Economic Affairs (DEA) Secretary Ajay Seth announced. The forthcoming discussion paper will explore the further extension of the remit on crypto regulations. Seth emphasized the importance of open dialogue, stating,
The policy stance is how does one consult relevant stakeholders, so it is to come out in the open and say here is a discussion paper, these are the issues, and then stakeholders will give their views.
Formulation by Inter-Ministerial Group
An inter-ministerial group, including the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), is currently formulating the discussion paper. The RBI has traditionally opposed legitimizing cryptocurrencies, citing macroeconomic stability risks.
SEBI however has advocated for regulatory oversight of cryptocurrency trading by multiple authorities. Sumit Gupta, the CEO of CoinDCX cryptocurrency exchange in India called on the government and the Ministry of Finance to consider input from domestic businesses before finalizing the consultation paper.
Focus on AML and EFT Compliance
India’s current regulatory approach to cryptocurrencies is primarily focused on anti-money laundering (AML) and electronic funds transfer (EFT) compliance. Seth added that cryptocurrencies are being regulated from the perspective of AML and EFT alone in India.
Historical Engagement with Cryptocurrencies
India has a history of cautious engagement with cryptocurrencies. Despite drafting a bill in 2021 to ban private cryptocurrencies, the legislation has not been introduced. The government’s recent measures include imposing stiff taxes on the crypto sector and requiring crypto entities to register with the Financial Intelligence Unit (FIU-IND) for AML compliance.
Tech Meets Finance: Octaloop’s India Blockchain Tour 2024 to Showcase Latest Innovations in Web3Combating Illegal Activities with Cryptocurrencies
In parallel, India continues to address the misuse of cryptocurrencies in illegal activities. The Narcotics Control Bureau (NCB) has intensified efforts to monitor cryptocurrency transactions on the darknet to combat drug trafficking. This includes forming a Special Task Force on Darknet and Cryptocurrency and enhancing digital forensics capabilities. Moreover, recent incidents like the $230 million hack of the WazirX crypto exchange underscore the need for robust regulatory measures to protect the industry and its stakeholders.
