The Securities and Exchange Board of India (SEBI) on Thursday proposed a concerted effort by regulators to oversee cryptocurrency trading, while the Reserve Bank of India (RBI) is calling for a ban on stablecoins.
SEBI’s proposal signals a desire to use private virtual assets – an approach not seen before in India. However, the RBI sees private digital currencies as a potential macroeconomic risk.
According to a Reuters report, the suggestions were forwarded to a “government panel” tasked with formulating a policy for consideration by the Finance Ministry.
SEBI’s multi-regulatory plan vs. RBI ban proposal
In its proposal, SEBI recommended that various regulators oversee cryptocurrency-related activities that fall under their domain. In addition, it suggested avoiding a single, unified regulator of digital assets.
SEBI said it could monitor cryptocurrencies classified as securities and initial coin offerings (ICOs). The commission could also issue licenses for capital market products.
This would be similar to the United States, where cryptocurrency securities and exchanges are regulated by the Securities and Exchange Commission (SEC).
Under the proposal, the Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA) should regulate virtual assets related to insurance and pensions.
It also recommended that complaints by cryptocurrency traders be handled in accordance with India’s Consumer Protection Act.
The RBI is anti-crypto
Since 2018, India has taken a tough stance on cryptocurrencies. The RBI banned lenders and financial intermediaries from working with cryptocurrency users or exchanges. However, the Supreme Court later rejected the move.
In 2021, the government drafted a bill to ban cryptocurrencies, although it was not introduced. In 2023, when he was president of the G20, the country called for a global framework to regulate such assets.
The RBI continues to advocate a ban on stablecoins, believing that digital currencies pose macroeconomic risks. The Hindu reported that RBI Deputy Governor T. Rabi Sankar believes that stablecoin coins, especially those tied to economies such as the US and Europe, can be risky.
“We need to be very cautious in allowing these types of instruments… From the past experience of other countries, this poses an existential threat to political sovereignty,” he said
The RBI further highlighted concerns about cryptocurrencies, citing risks such as tax evasion and decentralized peer-to-peer (P2P) voluntary compliance activities.
It also expressed concern about the loss of “seniority,” income from money creation.
After the Supreme Court overturned its 2018 rulings, the RBI insisted on strict compliance, excluding cryptocurrencies from India’s financial system.
Despite this, cryptocurrency trading continued, prompting the government to introduce a tax on cryptocurrencies in 2022. Later, all exchanges were required to register locally to facilitate cryptocurrency transactions.
