India is set to release a discussion paper outlining its policy stance on cryptocurrencies before September, according to Economic Affairs Secretary Ajay Seth. This initiative aims to gather feedback from relevant stakeholders on the proposed regulatory framework for cryptocurrencies in the country. The forthcoming discussion paper will seek input on the extent of cryptocurrency regulations in India, addressing current limitations.
Currently, cryptocurrencies in India are regulated primarily from an anti-money laundering (AML) and counter-terror financing (CTF) perspective, Seth noted during an interview with Moneycontrol. "Regulation starts and ends there, it cannot be beyond that, so should the remit be more? What should be the policy stance? All that will come out in the discussion paper."
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In March 2023, India extended AML and CTF standards to include crypto-assets and intermediaries. An inter-ministerial group, which includes the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi), is currently developing a broader policy for cryptocurrencies. "At the moment, an inter-ministerial group, is looking into a wider policy for cryptocurrencies. We expect to come out with the discussion paper before September," Seth added.
The decision to draft a discussion paper follows the endorsement of guidelines by G20 member countries during India’s presidency last year. These guidelines, formulated by the International Monetary Fund (IMF) and the Financial Stability Board (FSB), advised against an outright ban on crypto activities, deeming such a move impractical.
Seth highlighted the importance of the G20's agreed roadmap, which provides a framework for assessing risks and potential use cases for cryptocurrencies. This framework will likely influence the development of India's discussion paper.
What Will The Paper Bring To The Table?
The paper is intended to open a dialogue with stakeholders, presenting issues and gathering their perspectives. This approach aligns with a Reuters report from earlier this year, which indicated that Sebi has suggested multiple regulators oversee cryptocurrency trading, showing some authorities' willingness to permit private virtual assets. Conversely, the RBI has expressed concerns about the macroeconomic risks posed by private digital currencies.
"By seeking inputs from various stakeholders can potentially create a balanced regulatory framework. Currently, India's focus on cryptocurrencies revolves around AML and CTF measures, but a broader remit is definitely needed to expand the scope to include consumer protection, market integrity, and innovation that can ensure responsible growth," Mudrex CEO Edul Patel told ABP Live. "The inclusion of RBI and SEBI in the inter-ministerial group signals a collaborative effort, balancing innovation with risk mitigation. We look forward to the paper’s release in September."
"This initiative is a significant step toward shaping the future of the rapidly evolving and dynamic Web3 industry in India," CoinDCX co-founder Sumit Gupta said. "As key stakeholders in this sector, we urge the government to actively seek input from domestic businesses. Engaging with local businesses will ensure that the regulatory framework is robust, inclusive, and supportive of innovation."
CoinSwitch Co-Founder Ashish Singhal said, "We look forward to reading the fine print and contributing to robust cryptoasset regulations focused on consumer protection and innovation in India."
India's journey with cryptocurrency regulation has seen significant developments, including a 2018 ban by the central bank on financial institutions dealing with crypto users or exchanges, which was overturned by the Supreme Court in 2020. Despite the government's efforts to introduce a bill proposing a ban on private cryptocurrencies in 2021, it has yet to be enacted.
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