![SEBI's position has not been reported previously. (Representative image) SEBI's position has not been reported previously. (Representative image)](https://images.news18.com/ibnlive/uploads/2021/07/1627283897_news18_logo-1200x800.jpg?impolicy=website&width=510&height=383)
SEBI's position has not been reported previously. (Representative image)
SEBI said it may monitor cryptocurrencies in the form of securities as well as a new product called Initial Coin Offering (ICO).
India's market watchdog has recommended several regulators to oversee cryptocurrency trading, the strongest sign yet that at least some authorities in the country are open to allowing the use of private virtual assets, according to the document.
The Securities and Exchange Board of India (SEBI)'s position contrasts with that of the Reserve Bank of India (RBI), which claims that private digital currencies represent macroeconomic risks, a separate document has revealed.
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Both sets of documents, seen by Reuters, were submitted to a government panel tasked with setting policy for the Treasury to consider. SEBI's position has not been reported previously.
India has taken a hard line against cryptocurrencies since 2018. The central bank banned lenders and other financial intermediaries from dealing with cryptocurrency users or exchanges, but the measure was later struck down by the Supreme Court.
In 2021, the government has prepared a bill to ban private cryptocurrencies that have not yet been introduced. India, which chaired the G20 last year, called for a global framework to regulate these assets.
The RBI is still in favor of banning stablecoins, according to a person with direct knowledge of the panel discussion. The person, who is not authorized to speak to the media and declined to be identified, added that the committee plans to finalize its report as early as June.
Stablecoins are cryptocurrencies designed to maintain a constant exchange rate with fiat currency, making them less vulnerable to sudden volatility.
However, SEBI, in its report to the government panel, recommended that various regulators should oversee activities related to cryptocurrencies that fall under their respective jurisdictions and that a single unified regulator for digital assets should be avoided.
SEBI said it may monitor cryptocurrencies in the form of securities as well as a new product called Initial Coin Offering (ICO). It may also issue licenses for stock market-related products, an official with knowledge of the panel's discussions said.
This would be similar to the United States, where tokens in the nature of securities and cryptocurrency exchanges fall under the purview of the Securities and Exchange Commission.
Cryptocurrency assets backed by fiat currencies may be subject to regulation by the Reserve Bank of India, it said.
Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA) should regulate virtual assets related to insurance and pensions, the document said.
It also recommended that complaints from cryptocurrency trading investors should be resolved in accordance with Indian consumer protection laws.
SEBI and RBI did not respond to requests for comment. The Finance Ministry, IRDAI and PFRDA also did not respond to requests for comment.
Fiscal policy risk
In its submission, the RBI said that cryptocurrencies can lead to tax evasion and that decentralized peer-to-peer (P2P) activities in cryptocurrencies will rely on voluntary compliance, all of which represent risks to financial stability.
Cryptocurrencies could also lead to a loss of “seigniorage” income, which is the profits central banks earn from money creation, he said.
After the RBI's 2018 order was challenged by the industry and struck down by the Supreme Court, the central bank asked financial institutions to strictly adhere to stringent money laundering and foreign exchange rules, effectively blocking cryptocurrencies from India's formal financial system.
Despite this, trade thrived and in 2022 the government introduced a tax on cryptocurrency trading in India to discourage such transactions. We then requested all exchanges to register locally before enabling cryptocurrency trading in the country.
According to a December PwC report, 31 countries have implemented regulations allowing cryptocurrency trading.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – Reuters)