India’s market regulator, the Securities and Exchange Board of India (SEBI), says the decentralized nature of crypto assets makes consumer protection and regulatory compliance difficult.
SEBI on Cryptocurrency Regulation
The Securities and Exchange Board of India (SEBI) has reportedly told the Parliamentary Standing Committee on Finance that the decentralized nature of cryptoassets makes it difficult for any consumer protection or regulatory compliance in relation to this asset class.
Noting that “crypto assets are stored in decentralized distributed ledgers,” local media quoted SEBI as saying:
There is a high probability of unauthorized transactions that do not comply with any regulatory framework.
The market regulator stressed the need for clarity as to whether crypto assets are securities. “If crypto assets are not prohibited, then it is necessary to characterize the tokenized version of assets based on signs, which may attract the supervision of various industry regulators,” noted SEBI.
The regulator explained that there can be more than one cryptocurrency regulator, noting that different aspects of the crypto industry can be controlled by different regulators.
SEBI specified that consumer goods must be protected by the Consumer Protection Law. The Reserve Bank of India (RBI) can also regulate cryptocurrency trading platforms under the Foreign Exchange Management Act (FEMA). SEBI further said:
The digital currency acts as a bridge between the fiat currency of a foreign jurisdiction and the Indian rupee.
The market regulator clarified that stock exchanges regulated by SEBI cannot trade crypto assets without declaring them securities. The regulator noted that under Section 2(j) of the 1956 SCRA, “the stock exchange may only provide ‘assistance, regulation, or control of the business of buying, selling, or dealing in securities’.”
SEBI has also proposed a number of measures to the Advertising Standards Board of India. Last month, SEBI proposed to ban celebrities and public figures from advertising crypto products.
While crypto income and transactions are taxed in India, the government has yet to put in place a regulatory framework for crypto assets.
Finance Ministry officials are consulting with the World Bank and the International Monetary Fund (IMF) on the regulation of cryptocurrencies. The country’s finance minister said the government would not rush into crypto policy. The government is currently finalizing a consultation paper on cryptocurrencies.
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