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Support a multi-agency approach to regulating cryptocurrency companies | Cryptocurrency
Domestic crypto firms have indicated that more agencies may be needed to regulate the sector as the deadline to develop a common framework approaches.
Industry players believe that a single regulator overseeing the entire industry and creating a set of regulations from scratch would be complex and time-consuming before 2025.
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The International Monetary Fund-Financial Stability Board (IMF-FSB), which developed the regulatory framework for cryptocurrencies globally, has set a timeline to fill data gaps and collect evidence data on cryptocurrencies by the end of 2025.
According to reports, the Securities and Exchange Board of India (Sebi) may recommend that more regulators oversee cryptocurrency trading.
“From a purely policy perspective, I would imagine that setting up a new regulator at this point might be more difficult. Elements of the crypto ecosystem that have commonalities or similarities with other existing sectors,” said R Venkatesh, senior vice president of policy public at CoinSwitch, a crypto exchange platform.
Industry players feel that the Center may have to intervene in regulatory matters, considering the rapid technological innovation in the sector.
“It’s a decision that the government will have to make: either make a whole new set of laws from scratch and think about enforcement, or amend the existing laws, draw the lines as far as the existing regulators are concerned. This is keeping in mind the constant evolution that is happening in this space,” said Rajagopal Menon, vice president of WazirX, a cryptocurrency exchange.
Operators have welcomed the cryptocurrency industry’s openness to regulation, saying that setting rules for the ecosystem is the biggest benefit.
“We need to remember that time is running out, according to the G20 crypto roadmap under the Indian presidency last year. The roadmap clearly states that by 2025, crypto regulations are needed. This is just to get the ball rolling to get an idea of what the current regulators are thinking,” Menon added.
In 2023, the G20 finance ministers and central bank governors (FMCBG) adopted the cryptocurrency roadmap proposed in the International Monetary Fund (IMF) and Financial Stability Board (FSB) position paper.
According to a report by KuCoin, the Indian cryptocurrency market is expected to reach $241 million by 2030.
Who regulates what?
Although still in its early stages, cryptocurrency regulation could be based on similarities between the ecosystem and existing financial activities, while also depending on the nature of a cryptocurrency’s business.
“There may be the possibility of having different regulators depending on the nature of the activity and the precedence of applicability in our country. As we have seen, tokens have different properties and use cases. This is how the overall regulations can be framed” , said Sumit Gupta, co-founder and chief executive officer (CEO) of CoinDCX.
He explained that, after consultation, the industry could arrive at clear and applicable regulations across all platforms.
“Until this stage is reached, self-regulation can be allowed, which can bring out nuances and help formulate better regulations,” he added.
Elements of the crypto ecosystem that have similarities to stock markets could be supervised by Sebi, those that have a monetary or financial impact could be regulated by the Reserve Bank of India (RBI), and the Department of Consumer Affairs could play a role in customer protection.
“Sebi could be the regulator for things that look like trading. But crypto is not just trading and different tools are evolving globally. Real-world tokenization can be a big use case, as well as remittance-related services,” Gupta added.
However, the RBI’s stance on the sector remained unchanged.
In 2023, RBI Governor Shaktikanta Das said that cryptocurrencies pose a serious threat to global financial stability, especially emerging market economies.
“RBI is well positioned to manage the risks well. There is the Ministry of Finance, Sebi, which is looking at it from a completely different lens. But I am sure that between all of them, the stakeholders can ensure that the regulation is in the right kind of green space where innovation and industry can thrive,” said Venkatesh of CoinSwitch.
Meanwhile, players have called for a consultative approach to formulating regulations for the cryptocurrency industry in India.
“There can be a consultative approach to see what works and what doesn’t. We are already on the long road in this industry, and this will make the business survive and thrive,” WazirX’s Menon said.