India's SEBI Proposes Crypto Co-Regulation, RBI Favors Stablecoin Ban

SEBI proposes shared crypto oversight in India, differing from RBI's stablecoin ban stance amid regulatory uncertainty.

By Athena Xu

5/16, 08:28 EDT
Bitcoin / U.S. dollar

Key Takeaway

  • SEBI proposes shared crypto oversight in India, differing from RBI's stablecoin ban stance, suggesting a multi-authority regulatory approach.
  • Amid national elections, no immediate crypto-specific legislation expected before mid-2025; Finance Ministry leads with ambiguous legal stance but stiff taxes.
  • Recent registration of 46+ crypto firms indicates a shift towards credibility in the sector, despite ongoing policy ambiguity.

India's Crypto Regulatory Debate

India's approach to cryptocurrency regulation is currently at a crossroads, with the Securities and Exchange Board of India (SEBI) proposing a multi-authority oversight model. According to Reuters, SEBI has recommended that the responsibility for cryptocurrency trading oversight should be distributed among several authorities. This suggestion was made to a government panel, which is expected to submit its report by June. SEBI's stance is notably different from the Reserve Bank of India's (RBI), which has maintained a preference for a ban on stablecoins, viewing cryptocurrencies as a threat to policy sovereignty.

Diverse Regulatory Perspectives

The SEBI suggests a segmented regulatory framework where it would monitor cryptocurrencies that are considered securities, along with initial coin offerings (ICOs). Meanwhile, the RBI would handle assets backed by fiat currencies, such as stablecoins. Additionally, the Insurance Regulatory and Development Authority of India (IRDAI) alongside the Pension Fund Regulatory and Development Authority (PFRDA) would oversee insurance and pension-related virtual assets. For investor grievances related to cryptocurrencies, resolution under India's Consumer Protection Act has been proposed.

Political and Policy Uncertainty

Amidst national elections, with results due on June 4, the future of cryptocurrency legislation in India remains uncertain. Jayant Sinha, chair of the parliament's Standing Committee on Finance, indicated that a crypto or Web3-specific legislative bill is unlikely to be introduced before mid-2025. Despite the Finance Ministry's reluctance to clarify the legal status of cryptocurrencies, there have been signs of a changing stance towards the crypto industry. Notably, India's role as G20 president last year included efforts to achieve a global consensus on cryptocurrency regulation.

Emerging Credibility for Crypto

Recent developments suggest a shift in the credibility of the cryptocurrency sector in India. The registration of over 46 crypto-related firms with the nation's financial intelligence unit has been interpreted as a sign of increasing credibility, as stated by a ministry official. This shift, however, is still subject to the broader policy framework that is yet to be defined by policymakers. The lack of response from SEBI, RBI, India's Finance Ministry, IRDAI, and PFRDA to requests for comment underscores the ongoing uncertainty in the regulatory landscape.