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 on Crypto Regulation
The Securities and Exchange Board of India (SEBI) reportedly told the Parliamentary Standing Committee on Finance that the decentralized nature of crypto assets makes any consumer protection or regulatory enforcement of this asset class challenging.
Noting that “crypto assets are maintained in decentralized distributed ledgers,” SEBI was quoted by local media as saying:
There is a great likelihood of execution of unauthorized trades not in consonance with any regulatory framework.
The market regulator emphasized the need for clarity about whether crypto assets are 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 explained that there could be more than one regulator for crypto, noting that different aspects of the crypto industry could be overseen by different regulators.
SEBI detailed that consumer products should be protected through the Consumer Protection Act. The Reserve Bank of India (RBI) could also regulate crypto trading platforms under the Foreign Exchange Management Act (FEMA). SEBI further said:
A digital currency acts as a bridge between the fiat currency of the foreign jurisdiction and the Indian rupee.
The market regulator explained that stock exchanges regulated by SEBI cannot trade crypto assets without them being 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 had also proposed several measures to the Advertising Standards Council of India. Last month, SEBI proposed banning celebrities and public figures from endorsing crypto products.
While crypto income and transactions are taxed in India, the government has yet to introduce a regulatory framework for crypto assets.
Finance ministry officials have been consulting with the World Bank and International Monetary Fund (IMF) on crypto regulations. The country’s finance minister said that the government will not rush to come out with a crypto policy. The government is currently finalizing a crypto consultation paper.
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