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SEBI Proposes Multi-Regulator Oversight for Cryptocurrency Trading in India

The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI), along with other financial regulatory authorities in India, are involved in shaping the regulatory landscape for cryptocurrency trading in the country.

SEBI has proposed that cryptocurrency trading and other digital asset activities should be overseen by multiple regulatory bodies in India, each according to their jurisdictional expertise. This recommendation includes dividing responsibilities among SEBI, RBI, the Insurance Regulatory and Development Authority of India, and the Pension Fund Regulatory and Development Authority.

These recommendations were recently disclosed through documents that Reuters had access to. The proposals are part of ongoing discussions and have been submitted to a panel advising India’s finance ministry on cryptocurrency policy.

The regulatory actions and discussions are taking place within India’s financial regulatory framework, with implications for how digital assets are managed nationally.

Under SEBI’s proposal, the board would regulate digital assets considered securities, handle initial coin offerings, and issue licenses for related financial products. The RBI would take charge of fiat-backed stablecoins, citing concerns about their potential macroeconomic risks. Other digital asset-related insurance and pension activities would be managed by their respective regulatory authorities. Furthermore, consumer protection laws would be applied to disputes involving digital asset investors.

The RBI has expressed significant reservations about cryptocurrencies, suggesting a potential ban on stablecoins due to risks associated with tax evasion and fiscal stability. The central bank also fears that cryptocurrencies could undermine the traditional income from money creation. Amidst these regulatory considerations, India has taken strict measures against non-compliant foreign crypto exchanges, issuing notices and blocking access to ensure adherence to local regulations.

In December 2023, only KuCoin and Binance managed to navigate the regulatory environment successfully, obtaining licenses to resume operations in India. The evolving regulatory framework is part of India’s broader strategy to integrate digital assets into its financial system safely and securely, with recent calls for international cooperation on this front at the G20 summit.

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