Regulators in India are looking to publish a discussion paper regarding the nation’s stance on cryptocurrencies by the end of 2024. Ajay Seth, secretary of Economic Affairs, stated the paper aims to solicit comments from stakeholders to help craft the country’s crypto policy.
In an interview, Seth emphasized the current regulation focuses on anti-money laundering (AML) and combating the financing of terrorism (CFT). This discussion paper seeks to explore if the regulatory remit should extend further.
“In India it (cryptocurrencies) is being regulated from the perspective of AML and CFT alone. Regulation starts and ends there. Should the remit be more? What should be the policy stance? All that will come out in the discussion paper.”
Ajay Seth, secretary of Economic Affairs
An inter-ministerial group, including the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), is drafting the paper. The paper is expected before September.
The RBI has opposed cryptocurrencies, citing risks to economic stability, and has proposed a complete ban. In contrast, SEBI has supported a multi-agency approach to crypto regulation and outlined plans to delegate oversight to agencies like the Insurance Regulatory and Development Authority of India.
Seth noted an IMF-FSB synthesis paper published in July 2023, advising against an outright ban on digital currencies. This proposal, adopted by G20 finance ministers and central bank governors in October, could influence India’s policy framework.
Sumit Gupta, co-founder of Indian crypto exchange CoinDCX, praised the initiative as a “significant step” towards regulating the crypto sector.
Currently, India lacks a crypto regulatory framework but imposes a 30% tax on crypto profits and a 1% tax deducted at the source. The Financial Intelligence Unit has also mandated licensing for crypto service providers, resulting in the block of several off-shore exchanges.
The forthcoming discussion paper could mark a pivotal moment in India’s approach to cryptocurrency regulation, aiming to balance economic stability with innovation.
