What does the crypto regulatory landscape look like today?

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A study by crypto research and intelligence firm Crebaco reveals that 105 million Indians have invested in some kind of digital token. Recently, investments in cryptocurrencies in India reached Rs 75,000 crore.

However, despite huge investor interest, cryptocurrencies are currently unregulated in India. Industry bodies use codes of conduct to ensure members’ compliance with tax and other laws, while some regulations control advice on cryptocurrency.

A recent regulation by the Securities and Exchange Board of India (Sebi) prohibits investment advisers from giving advice on unregulated instruments, which means that registered investment advisers (RIAs) cannot provide any advice to clients on investments cryptographic. However, cryptocurrencies are not illegal in India.

Current situation: “Cryptocurrency is currently an unregulated entity in our country, which means Sebi has no control over it,” says Manav Bajaj, founder of Panther Quant, an algorithmic crypto trading platform built on blockchain.

Players are hoping for pro-crypto regulation. “We hope the government brings favorable regulations to foster the cryptocurrency space and technologies, like blockchain. The regulation will bring certainty to interested investors who have hesitated so far due to the lack of clear regulation and will encourage further adoption of the cryptocurrency, ”said Sharan Nair, Chief Commercial Officer of CoinSwitch Kuber.

Also, since RIAs are not authorized to give advice on cryptocurrencies, it is not easy to find someone who can give investors proper investment advice.

IAMAI Code of Conduct: The Blockchain and Crypto Assets Council (BACC), which is part of the Internet and Mobile Association of India (IAMAI) industry body, has established a self-regulatory code of conduct that establishes rules by which members can voluntarily comply with.

Recently, BACC brought in CoinSwitch Founder and CEO, Ashish Singhal, and CoinDCX Co-Founder and CEO, Sumit Gupta. The Council’s Code of Conduct aims to enable online KYC verification for all clients, control fraud and market manipulation, ensure compliance with laws and tax authorities, and promote investor education, among others. .

“A code of conduct is essentially a standard list of best practices to be followed by exchanges to ensure that existing laws such as PMLA, AML, FEMA (Prevention of Money Laundering Act, Anti Money Laundering, Foreign Exchange Management Act) and KYC standards are not violated. These are not specific to crypto, but since crypto is a distant financial product, they are decided with financial products laws in mind, ”says Naimish Sanghvi, Founder of Coin Crunch India, a cryptocurrency information website.

Early Days: From early days, RBI warned people about the risks of investing in cryptocurrencies. In 2003, the central bank warned people about how they might lose money if they invest in cryptocurrencies. These threats involved the loss of sensitive data, malware attacks and the compromise of investor portfolios.

Also, since there are no regulations on cryptocurrencies, in the event of a dispute or fraud, users would have nowhere to turn.

The RBI has maintained its cautious stance on cryptocurrencies since then, even as cryptocurrency investing is gaining popularity in India. In April 2018, RBI had basically banned cryptocurrencies in India by requiring that one cannot use the rupee to buy cryptocurrencies or link their bank accounts to cryptocurrency platforms. However, the Supreme Court overturned the ban in March 2020.

Do Your Own Research: If you still decide to invest in cryptocurrencies, the only safe way to invest is to do your own research. It should also be understood that the prices of cryptocurrencies experience huge price fluctuations because they are not backed by an asset.

“New crypto investors should start their journey by finding reliable sources and educating themselves. They should research the exchanges and their characteristics before deciding on one. This will help them manage their expectations and determine how much money they can afford to invest in cryptocurrency, ”adds Nair.

Going forward, the central government would soon be working on introducing regulations for cryptocurrencies. “The Cryptocurrency and Official Digital Currency Regulation Bill, 2021 is also going to be introduced, which is a step forward in the recognition and regulation of cryptocurrencies in India,” Bajaj said.

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