India’s market regulator, the Securities and Exchange Board of India (SEBI), says the decentralized nature of crypto assets makes consumer protection and enforcement difficult.
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 consumer protection or regulatory enforcement of this class of assets is a challenge.
Noting that “crypto assets are held on decentralized distributed ledgers,” local media quoted SEBI as saying:
There is a high probability of execution of unauthorized transactions that are not in line with any regulatory framework.
The market regulator emphasized the need for clarity on whether crypto assets are securities. “If crypto assets are not banned, then there is a need for a feature-based characterization of the tokenized version of the assets, which may attract oversight from different sectoral regulators,” SEBI noted.
The regulator explained that there could be more than one regulator for cryptocurrencies, noting that different regulators could oversee different aspects of the cryptocurrency industry.
SEBI explained that consumer products must be protected through the Consumer Protection Law. 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 SEBI-regulated stock exchanges cannot trade crypto assets without their being declared securities. The regulator noted that under Section 2(j) of the SCRA, 1956, “a stock exchange may only assist, regulate, or control 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 ban celebrities and public figures from endorsing crypto products.
While crypto income and transactions are taxable in India, the government has yet to introduce a regulatory framework for crypto assets.
Officials at the Ministry of Finance have been consulting with the World Bank and the International Monetary Fund (IMF) about crypto regulations. The country’s finance minister said the government will not rush to come up with a crypto policy. The government is currently finalizing a crypto consultation document.
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