The Securities and Exchange Board of India (SEBI) this week said it may work with the RBI and the Insurance Regulatory and Development Authority of India (IRDAI) to oversee the digital asset sector in the 'India. In its suggestion to the government, the Indian markets regulator said it could monitor cryptocurrencies that can be viewed as securities and keep an eye on initial coin offerings (ICOs). As part of SEBI's advisory, the RBI and IRDAI could respectively monitor fiat-backed stablecoins and insurance- and pension-related virtual assets.
Essentially, SEBI has suggested that instead of having a particular body governing the virtual digital asset sector, a collection of already established government bodies can distribute oversight of this emerging sector.
Speaking to Gadgets360, Edul Patel, who heads crypto investment platform Mudrex, said SEBI's recognition of the VDA sector in India is a positive sign in itself. In addition, its advice to distribute oversight of the VDA sector across different bodies will draw on the expertise of various financial authorities, thereby improving regulatory clarity.
“SEBI's proposal for multiple regulators to oversee the Virtual Digital Assets (VDA) sector represents a balanced and pragmatic approach. It is a progressive position that recognizes the multifaceted nature of VDAs. In addition, it can help build investor confidence as a well-regulated environment reduces the likelihood of market abuse and improves the overall integrity of the ecosystem,” Patel said.
The Web3 sector in India has shown growth in recent years, which has drawn the government's attention to this industry. From three percent in 2018, India's overall share of the blockchain developer pool increased significantly to 12 percent last year, according to a recent report by Hashed Emergent, a Web3 venture firm focused on the india The report also noted that out of 150 nations, India has claimed the top spot for on-chain adoption by 2023 with over 35 million trading accounts on major Indian exchanges.
In 2023, when India chaired the G20 group, it prioritized formulating a crypto roadmap that could work uniformly across all G20 countries. Also domestically, the country has been implementing regulations in the Web3 sector to ensure that these digital assets are not leveraged to facilitate illicit cross-border money transfers for money laundering or terrorist financing. India, for example, has been taxing crypto income and activities since 2022. Indian crypto players are also required to comply with KYC and anti-money laundering laws.
Rajagopal Menon, the vice president of Indian crypto exchange WazirX, said that it is only a matter of time before the impact of the government's decision starts to show in the Web3 sector, so a calculated approach is undeniably needed.
“These are suggestions / recommendations; let's see what the final shape will be, whether we have multiple regulators or just one,” Menon told Gadgets360. “India has already taken baby steps towards regulation by imposing taxes and bringing crypto into PMLA. According to the G20 Delhi Declaration, all signatory countries must have crypto regulation in place by 2025. This report suggests that the government has put regulation in place.”
While government bodies like SEBI, RBI and IRDAI are taking active steps to help the government govern the VDA sector without suppressing its use cases and growth potential, the industry itself is working to adopt some self-regulation practices.
The Bharat Web3 Association (BWA), which is the industry advisory body headed by Dilip Chenoy, recently laid down a bunch of self-regulatory guidelines to streamline the token listing process for crypto exchanges operating in the India The purpose of these rules is to ensure that scam tokens and potentially risky cryptocurrencies do not enter the Indian Web3 ecosystem.
CoinSwitch founder Ashish Singhal, who is also a member of the BWA, spoke to X to comment on SEBI's latest suggestion to the government.
“Encouraging opinion on crypto from SEBI which has overseen India's thriving stock markets. In the past, a favorable regulatory environment has paved the way for greater consumer adoption in several other sectors such as telecom , IT, e-commerce, etc. This is a start and many nuances will need to be discussed. However, great news for crypto in India,” Singhal said.
