SEBI has suggested that multiple regulators should oversee activities linked to cryptocurrencies that fall under their respective domains, and that a single unified regulator for digital assets should be avoided. This recommendation has been made to a government panel tasked with formulating policy for the finance ministry to consider.
The concerns around cryptocurrency regulation are multifaceted and stem from the unique characteristics of digital currencies. Cryptocurrencies are known for their high price volatility, which can lead to significant financial risk for investors and traders.
SEBI's approach includes monitoring cryptocurrencies that take the form of securities as well as new offerings called Initial Coin Offerings (ICOs). They have also mentioned the possibility of issuing licenses for equity market-related products. On the other hand, the RBI maintains a cautious stance, viewing private digital currencies as a macroeconomic risk and favoring a ban on stablecoins.
This development indicates a significant shift in India's regulatory approach towards cryptocurrencies and could lead to a more structured and formalized framework for crypto trading in the country. The panel plans to firm up its report as early as June 2024.
In 2021, the government prepared a bill that would have banned private cryptocurrencies though it has not been introduced. Last year, when it was president of the G20, India called for a global framework to regulate such assets.
Globally, there are several successful models for cryptocurrency regulation that have been developed by the respective countries. The EU introduced the Markets in Crypto-Assets Regulation (MICA) in May 2023, which is considered the world's first comprehensive cryptocurrency regulation. MICA aims to provide legal clarity and ensure consumer protection, market integrity, and financial stability.
The US has seen developments such as the Financial Innovation and Technology (FIT) for the 21st Century Act and the Blockchain Regulatory Certainty Act. These bills aim to define when a cryptocurrency is a security or a commodity and expand oversight of the industry.
The International Organization of Securities Commissions has laid out 18 recommendations for global rules on managing crypto and digital assets. The World Economic Forum's Digital Assets Regulatory (DAR) initiative analyzes outcomes of different national approaches to digital asset regulation.
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