6 months ago
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In contrast to SEBI’s standing on crypto, the RBI is taking a more cautionary approach towards the emerging economy.
The crypto scene in India is facing uncertainty as two key financial watchdogs, the Securities and Exchange Board of India (SEBI), and the Reserve Bank of India (RBI), hold differing views on whether to allow private individuals to trade digital assets.
In a recent Reuters report citing internal documents from both regulators, SEBI, entrusted with supervising India’s securities market, leans towards permitting investors to engage in the emerging market.
SEBI’s documents indicate a stance supporting the involvement of other regulatory bodies in India to establish a clear framework enabling individual investors to partake in digital asset trading within the region.
SEBI Open to Crypto Trading
However, these rules would only apply to digital assets that fall under the purview of the agency. SEBI believes that digital assets should not be regulated under one regulatory body; instead, different agencies should monitor cryptocurrencies that take the form of securities as well as new offerings called Initial Coin Offerings (ICOs).
The document showed that SEBI wants the RBI to regulate stablecoins and other digital assets backed by fiat currencies while it handles others.
As for pension-related virtual assets, the regulator wants the Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA) to be in charge of managing the assets.
Additionally, the market watchdog is ready to issue licenses to companies offering equity market-related products in the country. The regulator suggested treating grievances from crypto investors using the same Consumer Protection Act for consumers in India.
RBI’s Cautionary Stance on Cryptocurrency
In contrast to SEBI’s standing on crypto, the RBI is taking a more cautionary approach towards the emerging economy. The central bank’s documents assert that “private digital currencies pose a macroeconomic risk” and, therefore, should not be introduced into the financial market.
The RBI raised concerns in its submissions, warning that the digital asset could be used to facilitate tax evasion. The central bank is also worried about their reliance on voluntary compliance in decentralized peer-to-peer (P2P) transactions. Additionally, the RBI highlighted the risk of losing “seigniorage” income, the profit generated by central banks through money creation in the document.
RBI Plans to Ban Stablecoins
The bank had previously made a move to stop financial companies, including lenders and other intermediaries, from associating with crypto exchanges or directly servicing their users in 2018. The rule was later overturned by the country’s Supreme Court.
When the Supreme Court overturned the bank’s plan, it resorted to introducing stringent anti-money laundering and foreign exchange rules.
The bank demanded that financial institutions comply with the rules or face the consequences. The move aimed to keep out cryptocurrencies from the Indian-approved financial system.
Despite this regulation, Reuters said that the RBI is currently fighting to ban stablecoins in the country. However, a panel will decide on this decision.
