Making the case for multi-agency approach to regulate crypto firms | Cryptocurrency

“Purely from a policy lens, I would imagine that instituting a new regulator at this point might be more difficult. Elements of the crypto ecosystem that have commonalities or similarities with other existing sectors,” said R Venkatesh, senior vice president of public policy at CoinSwitch, a crypto exchange platform.

Industry players suggest that the Centre may have to approach regulation, considering the fast-paced technological innovation within the sector.

“It is a call that the government will have to take: either enact a whole new set of legislation starting from scratch while also thinking about execution or tweak existing laws, draw the guardrails concerning existing regulators. This is keeping in mind the constant evolution happening within this space,” said Rajagopal Menon, vice president of WazirX, a crypto exchange platform.

Players have welcomed the openness to regulate the crypto sector, stating that defining rules for the ecosystem is the biggest advantage.

“We have to remember that time is running out, according to the G20 roadmap on crypto assets under India’s presidency last year. The roadmap clearly says that by 2025, you need crypto regulations. 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 (FMCBG) adopted the roadmap on crypto assets which was proposed in the synthesis paper by the International Monetary Fund (IMF) and Financial Stability Board (FSB).

The Indian crypto market is expected to reach $241 million by 2030 in size, according to a KuCoin report.

Who regulates what?

While still in its early stages, crypto regulation could be based on the similarities between the ecosystem and existing financial assets while depending on the nature of a crypto’s activity.

“There might be the possibility of having different regulators depending on the nature of activity and the applicability precedence in our country. As it has been seen, tokens have different properties and use cases. This is how the overall regulations may be framed,” said Sumit Gupta, co-founder and chief executive officer (CEO), CoinDCX.

He elucidated that the industry may arrive at regulations that are clear and enforceable across platforms after consultation.

“Till the time that stage is reached, self-regulation may be allowed which can bring out the nuances and help frame better regulations,” he added.

Elements of the crypto ecosystem having similarities with stock markets could be overseen by the Sebi, those having a monetary or financial bearing could be regulated by the Reserve Bank of India (RBI), and the Department of Consumer Affairs could play a role concerning customer protection.

“Sebi may be the regulator for the aspects that resemble trading. But, crypto does not only mean trading and different instruments are getting evolved globally. Real-world tokenisation can be a big use case as can be services related to remittance,” Gupta added.

However, the RBI’s stance with respect to the industry has remained unchanged.

In 2023, RBI Governor Shaktikanta Das said that cryptocurrencies are a serious threat to global financial stability, especially for emerging market economies.

“RBI is well-placed to manage risks well. There is the Ministry of Finance, Sebi that looks at it from a different lens altogether. But I’m sure between all of them, the stakeholders can ensure that regulation falls in the right kind of green space where innovation and the industry can flourish,” Venkatesh from CoinSwitch said.

Meanwhile, players have called for a consultative approach to formulating regulations for the crypto industry in India.

“There can be a consultative approach to see what works and doesn’t. We are already for the long game in this industry, and this will make the business survive and thrive,” Menon from WazirX said.