Home-grown cryptocurrency companies call for multi-agency regulation

Industry warns of complex, time-consuming legislation through a single regulator before 2025

Home-grown cryptocurrency firms suggest that regulating the sector may necessitate the involvement of multiple agencies, given the approaching deadline to develop a unified framework.

Industry participants believe that creating comprehensive legislation through a single regulator could be complex and time-intensive ahead of the 2025 timeline.

The International Monetary Fund-Financial Stability Board (IMF-FSB), which developed a global policy framework for crypto assets, has set a deadline to address data gaps and gather test data on crypto assets by the end of 2025.

Reports indicate that the Securities and Exchange Board of India (Sebi) may propose supervision by multiple regulators for crypto trading.

“From a policy lens, instituting a new regulator at this point could pose challenges. There are aspects of the crypto ecosystem that share similarities with existing sectors,” said R Venkatesh, senior vice-president (V-P) of public policy at CoinSwitch, a crypto exchange platform.

Industry insiders suggest that the government may need to consider regulation due to rapid technological innovation in the sector.

“The government faces a decision: either enact entirely new legislation from scratch or amend existing laws and build guardrails, considering the constant evolution in this field,” said Rajagopal Menon, V-P of WazirX, a crypto exchange platform.

Players welcome the openness to regulate the crypto sector, emphasising that defining rules for the ecosystem is the biggest advantage.

“We must remember the Group of Twenty (G20) road map on crypto assets under India’s presidency last year, which states that crypto regulations are needed by 2025. This is just to get the ball rolling to get a sense of what the existing regulators think,” Menon added.

In 2023, G20 finance ministers and central bank governors adopted a road map on crypto assets proposed in a synthesis paper by the IMF and FSB.

According to a KuCoin report, the Indian crypto market is projected to reach $241 million by 2030.

Who will regulate what?

While still in its nascent stages, crypto regulation may draw on similarities with existing financial assets and the nature of crypto activities.

“There may be different regulators depending on the nature of activity and its precedent in our country. Tokens have varying properties and use cases, shaping the overall regulatory framework,” said Sumit Gupta, co-founder and chief executive officer of CoinDCX, a crypto investment application.

Gupta highlighted the potential for clear and enforceable regulations across platforms through consultation.

“Until that stage is reached, self-regulation may be permitted to capture nuances and help frame better regulation,” he added.

Aspects of the crypto ecosystem resembling stock markets could fall under Sebi’s oversight, while those with financial implications could be regulated by the Reserve Bank of India (RBI), and consumer protection might involve the Department of Consumer Affairs.

“Sebi may oversee trading aspects, but crypto extends beyond trading, with evolving instruments globally. Real-world tokenisation and remittance-related services are emerging as major use cases," Gupta explained.

However, the RBI’s stance on the industry has remained unchanged.

In 2023, RBI Governor Shaktikanta Das warned that cryptocurrencies pose a serious threat to global financial stability, particularly for emerging market economies.

“RBI is well-positioned to manage risks effectively. With the Ministry of Finance and Sebi viewing it from different perspectives, stakeholders can ensure regulations foster innovation and industry growth,” said Venkatesh.

Meanwhile, stakeholders advocate for a consultative approach to crafting regulations for India’s crypto industry.

“A consultative approach will assess effectiveness and challenges. As an industry playing the long game, this approach will make the business survive and thrive,” Menon added.