Regulation of Crypto-asset Exchange


The government should take a co-regulatory strategy, in which industry associations and regulatory bodies like SEBI, the RBI, and the Ministry of Finance share supervision responsibilities. Regulating Crypto Assets in India, a report co-authored by the Esya Centre and the Observer Research Foundation, two New Delhi-based policy think tanks, includes this finding.

This method is similar to Japan’s, where the government has tasked industry organizations with enforcing legislation. The paper also suggests incentivizing industry whistle-blowing so that participants in the crypto market can keep tabs on one another behavior.

Over the previous five years, the Indian crypto asset business has grown at an exponential rate. According to reports, over 15 million Indians now own digital currencies. As a result, cryptocurrencies, like any other financial asset, must be regulated to protect consumers and foster innovation.

The report delves into the world of cryptocurrencies in India, which is one of the fastest-growing markets in the world, and comes as New Delhi prepares to draught legislation to govern the asset.

Crypto-assets are likely to become the foundation for future forms of the internet, according to the analysis, and India is best positioned to profit from this due to its burgeoning private crypto market.

Given this, banning private crypto assets would be imprudent, as it would result in huge income loss for the government and compel emerging firms to operate. Instead, the research recommends a balanced regulatory strategy that balances concerns about fiscal stability, money laundering, investor protection, and regulatory certainty with the preservation of innovation.

“Most regulatory equations necessary to address the policy concerns linked to crypto-assets, such as investor protection, foreign exchange management, money-laundering, and tax evasion, already exist in finance legislation,” according to one of the authors, Meghna Bal. They simply need to be adjusted to fit a new technological paradigm. Our report’s proposals demonstrate how this can be accomplished.”

Classifying cryptocurrency as a security, product, or capital asset in India could result in unforeseen investment limits or regulatory gaps in crucial policy areas. A one-of-a-kind crypto framework that takes into account the intricacies of the crypto business would be more relevant and in line with global trends.

To fully exploit India’s potential in this arena, the research makes recommendations to lawmakers on what should be included in a crypto regulatory framework: it should be technology-neutral, innovation-friendly, and consistent.

According to the research, the framework must include clear definitions, the identification of relevant regulatory authorities, and the creation of KYC/anti-money laundering obligations, among other things. It should also create a safe harbor for crypto asset service providers, shielding them from accountability for their activities. 

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