No proposed ban; Sebi to regulate

[ad_1]

The Union government has decided to subject cryptocurrencies to a regulatory framework instead of banning them, said two people with first-hand knowledge of the matter, allaying fears of a Chinese-style crackdown on these assets.

Under the proposed law, the cryptocurrency will be rebranded as crypto-asset and placed under the regulatory scope of the Securities and Exchange Board of India (Sebi), the people said.

Fears over a ban have resulted in a drop in the value of cryptocurrencies traded on local exchanges. Following a government notification regarding the filing of a crypto bill, bitcoin fell more than 13% on the Indian exchange site, WazirX, while Shiba Inu and Dogecoin both fell more by 15%. They did, however, recover some of their value.

The government’s plan to regulate and not ban cryptocurrencies was first reported by NDTV.

“Classifying crypto as an asset will ensure that there is no overlap between the digital currency that will be launched by the Reserve Bank of India (RBI) and crypto. All crypto exchanges will fall under Sebi’s regulatory scope. Any violation could result in financial penalties ranging from 5 to 20 crore and imprisonment, ”said one of the two people named above.

“The government will present the bill to Parliament during the third week of this session. This will be separate from the RBI digital trust bill, ”the second person said.

This means that crypto transactions will have to go through platforms and exchanges registered by Sebi.

“There will be a prescribed deadline to ensure that all current trades are registered with Sebi,” the first person added.

The consolidation of crypto platforms under Sebi will ensure that only serious players are present in the market, putting an end to the current phenomenon of the proliferation of crypto platforms and potential scams.

“Regulating a trading platform is an indirect way to regulate a digital instrument. Instead of a total ban, it will bring about an organized market. However, the challenge will be to formulate and enforce cross-border KYC standards, investor protection mechanism, reporting and imposition to ensure the development of the crypto market for its ever-changing regulation, ”said Sumit Agrawal, founder of Regstreet Law Advisors and former Sebi. official.

While this is a step forward, it does not come without its fair share of challenges. Sebi was not keen on regulating crypto as it has no underlying assets.

“How do you ensure settlement in the absence of an underlying?” Said an official at Sebi on condition of anonymity.

Deepak Shenoy, founder of Capital Mind, an investment management firm, said not all transactions are recorded on a blockchain.

“There is only one or a few wallet addresses, which hold the coin, and clients buy / sell from each other, but this record is only kept by the exchange. No regulator here. Sebi might need to create a mechanism such that every transaction and every wallet is segregated with some kind of centralized demat store, so you could have a separate database that is more real-time to store coin ownership, ” Shenoy said.

To prevent money laundering, the bill will ensure that certain provisions of the Prevention of Money Laundering Act (PMLA) are also applied.

A senior crypto industry official said, “My personal view remains that one regulator may not be the right approach. The future, anyway, is not about asset trading. It’s beyond that, like DFTs – where would they fit in? There are a lot of people, including us, who are suggesting that Sebi is the regulator, ”he said.

Responding to a question relating to cryptocurrencies in the Rajya Sabha on November 30, Finance Minister Nirmala Sitharaman said the bill would be introduced after Cabinet approval.

“This is a risky area and not in a full regulatory framework. No decision has been taken on banning his advice. Steps are being taken to raise awareness through RBI and Sebi. The government will soon table a bill, ”she added.

Arti Singh contributed to the story.

Subscribe to mint newsletters

* Enter a valid email address

* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our app now !!

[ad_2]