Reckless to ban private crypto assets: report
Cryptocurrencies have grown exponentially over the past five years with over 15 million Indian investors and, therefore, like any other financial asset, the asset class needs to be regulated to protect the welfare of the consumers and promote innovation, according to a jointly published report. by Esya Center and Observer Research Foundation.
The report points out that crypto assets are likely to form the basis of future forms of the internet and that India is well positioned to take advantage of it due to its burgeoning private crypto market. Given this, it would be unwise to ban private crypto assets, as these can result in a significant loss of government revenue and force infant industries to operate illegally.
Instead, the report advocates a balanced regulatory approach that addresses concerns of fiscal stability, money laundering, investor protection and regulatory certainty while preserving innovation.
According to one of the authors, Meghna Bal, “Most of the regulatory formulas needed to address political concerns related to crypto-assets, such as investor protection, currency management, money laundering and tax evasion , already exist in financial legislation. They just need to be adapted to fit an emerging technological paradigm. The recommendations in our report show how this can be done. “
In India, classifying crypto as a security, asset, or asset could lead to unintentional restrictions on investments or leave regulatory loopholes in key policy areas. A sui generis A crypto framework that adopts the nuances of the crypto industry would be more appropriate and in line with emerging global trends.
Suggestions for legislators
The report also offers suggestions to lawmakers on what a crypto regulatory framework should include: it must be technologically neutral, respectful of innovation and coherent to fully exploit India’s potential in this area. Among other things, the framework should establish clear definitions, identify relevant regulatory bodies and create KYC / anti-money laundering obligations, the report says. It should also provide crypto asset service providers with a safe harbor – protection against liability for investor actions on their platform. This will help asset service providers innovate and evolve new crypto-based products and offerings.
The report also recommends that the government adopt a co-regulatory approach where industry associations and authorities such as SEBI, RBI and the Ministry of Finance share responsibility for oversight. Such an approach is inspired by the book from Japan, where the authorities tasked industry associations to enforce regulations. The report also recommends encouraging industry whistleblowing so that players in the crypto market make an effort to control each other’s activities.
Such an facilitating regulatory framework will boost the growth of the Indian crypto ecosystem while addressing any possible harm to consumers and society as a whole, according to the report.