Regulation
India to release discussion paper on cryptocurrency policy by September 2024
Indian regulators plan to release a discussion paper regarding the country’s stance on cryptocurrencies by the end of 2024.
In a recent interviewEconomic Affairs Secretary Ajay Seth said the discussion paper will inform the government’s position on cryptocurrencies. The paper will seek to solicit feedback from relevant stakeholders in shaping the cryptocurrency policy in one of the world’s most populous countries.
“In India, cryptocurrencies are regulated only from the perspective of anti-money laundering and combating the financing of terrorism. The regulation starts and stops there, it cannot go further. So should the mandate be broader? What should be the policy position? All this will be set out in the discussion paper.”
Ajay Seth, Secretary of Economic Affairs
An inter-ministerial group of several regulators is drafting the discussion paper. The group would explore a “broader policy for cryptocurrencies,” Seth said.
The discussion paper is expected to be published before September.
The group includes the Reserve Bank of India, the country’s central bank, and the Securities and Exchange Board of India, its market regulator.
The RBI has consistently opposed allowing cryptocurrencies in India, citing risks to the country’s economic stability. As such, the central bank has proposed a Total ban on cryptocurrencies instead of regulating them.
Meanwhile, India’s securities regulator has taken a more supportive stance. In May 2024, SEBI said the country should adopt a Multi-agency approach to crypto legislationThe suggestions, presented to an advisory group, outlined plans to delegate oversight to various agencies such as the Insurance Regulatory and Development Authority of India.
Seth also referred to an IMF-FSB position paper released in July 2023 that advises against an outright ban on digital currencies. The G20 Finance Ministers and Central Bank Governors (FMCBG) adopted the proposal of the global regulator in October.
The IMF and FSB proposal was made during India’s presidency of the G20 summit last year. Seth suggested that these frameworks could be taken into account while drafting the policy paper.
Sumit Gupta, co-founder of Indian crypto exchange CoinDCX, welcomed the move, saying it was an “important step” towards regulating the crypto sector.
“As key players in this sector, we urge the government to actively seek input from domestic companies. Engagement with local businesses will ensure that the regulatory framework is robust, inclusive and conducive to innovation,” Gupta told crypto.news.
India does not yet have a regulatory framework for cryptocurrencies, but it has imposed a 30% tax on profits generated from cryptocurrencies, as well as a 1% withholding tax. However, this has not stopped regulators from cracking down on the sector.
India’s Financial Intelligence Unit has Compulsory license for crypto service providers operating in the country and, therefore, several offshore crypto exchanges have been blocked earlier this year.