India’s market regulator, the Securities and Exchange Board of India (SEBI), says the decentralized nature of crypto assets makes consumer protection and regulatory enforcement challenging.
SEBI Crypto Regulation
According to the Securities and Exchange Board of India, (SEBI), the Parliamentary Standing Committee on Finance was told by the SEBI that crypto assets have a decentralized nature which makes consumer protection and regulation difficult.
Noting that “crypto assets are maintained in decentralized distributed ledgers,” SEBI was quoted by local media as saying:
Illegal trades can be executed without compliance with regulations.
Market regulator SEBI stressed the importance of defining whether cryptocurrency assets can be considered securities. “If crypto assets are not banned, then there is a need for feature-based characterization of the tokenized version of the assets, which may attract supervision of different sectoral regulators,” SEBI noted.
The regulator stated that crypto may have more than one regulator. He also noted that regulators could oversee different aspects of the industry.
SEBI explained that the Consumer Protection Act should protect consumer products. Under the Foreign Exchange Management Act, (FEMA), crypto trading platforms could be regulated by RBI. SEBI also stated:
The digital currency serves as an intermediary between the Indian rupee and the fiat currency from the foreign country.
According to the market regulator, stock exchanges that are regulated by SEBI can’t trade crypto assets unless they have been declared securities. The regulator noted that under Section 2(j) of the SCRA, 1956, “a stock exchange can only provide for ‘assisting, regulating or controlling the business of buying, selling or dealing in securities.”
SEBI also suggested several steps to be taken by the Advertising Standards Council of India. SEBI suggested last month that celebrities and other public figures should be prohibited from endorsing cryptocurrency products.
India taxes crypto income and crypto transaction, but the government has not yet established a regulatory framework to regulate crypto assets.
Financial ministry officials are currently consulting the World Bank, International Monetary Fund (IMF), on cryptocurrency regulations. The country’s finance minister said that the government will not rush to come out with a crypto policy. The government is working on a paper for crypto consultation.
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