FameEX Hot Topics | India’s SEBI Suggests Domestic Regulators Oversee Crypto Trading

The Securities and Exchange Board of India (SEBI) has proposed that cryptocurrency trading should be monitored by multiple regulatory bodies, according to documents recently revealed by Reuters. These documents outline a vision for diversified regulatory oversight within India’s financial sector.

SEBI’s suggestion, submitted to a panel advising India’s finance ministry, advocates for a sectorial approach to cryptocurrency regulation. Instead of a single entity managing all aspects of digital assets, SEBI recommends that various regulators oversee activities relevant to their specific areas of jurisdiction.

Under SEBI’s proposal, the organization itself would regulate digital assets that qualify as securities, manage initial coin offerings, and handle licensing for related financial products. Meanwhile, the Reserve Bank of India (RBI) would be responsible for regulating fiat-backed stablecoins. Additional regulatory responsibilities would be distributed among other authorities: crypto-related insurance issues would be overseen by the Insurance Regulatory and Development Authority of India, while digital asset matters pertaining to pensions would fall under the jurisdiction of the Pension Fund Regulatory and Development Authority. Furthermore, the Consumer Protection Act would apply to disputes between investors.

However, the RBI holds a more cautious stance on cryptocurrencies. Sources close to the matter indicate that the RBI favors a ban on stablecoins and has raised concerns that digital currencies could underpin tax evasion efforts. The bank also noted that the decentralized nature of peer-to-peer cryptocurrency transactions largely relies on voluntary compliance, which could threaten fiscal stability. Moreover, the RBI argues that widespread adoption of cryptocurrencies might lead to a significant loss of revenue for central banks, stemming from the traditional income generated through money creation.

India’s approach to integrating digital assets into its regulatory framework has been evolving. In December 2023, the country took a firmer stance by issuing 15 notices of noncompliance to foreign crypto exchanges. These notices led to the blocking of the firms’ URLs and mobile applications, restricting their accessibility to local users. This action reflects ongoing efforts by Indian authorities to navigate the complex landscape of cryptocurrency regulation and to mitigate the associated risks while fostering a secure environment for technological innovation and investment in digital assets.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.