Modi Wave 2.0 has swept the country with the man in orange coming to power again. One group of people, however, are clamouring for a change, and a long overdue one at that.
The Indian crypto-community has long been denied any sort of regulation, apart from a generally primitive attitude towards cryptocurrency. Until now, the main regulatory party, the Reserve Bank of India, has only banned banks from interacting with companies that handle cryptocurrency.
Is a change coming now? With the election of Modi to term again, the possibility of actual regulation might be addressed.
The Story Until Now
There has no action been taken by the regulatory party for more than a year now, with the closest being a case that has been postponed repeatedly in the Supreme Court. This has frustrated many Indian cryptocurrency enthusiasts, as developed countries are beginning to see the benefits of crypto.
The RBI and the government both maintain that crypto is not a legal tender in the country, which means that it is not a valid form of payment for goods and services. This, along with the banking ban, has put enthusiasts in a position of no regulatory clarity.
However, the government has not completely ignored this technology. A committee put together by the Secretary of the Department of Economic Affairs, Subhash Chandra Garg, was tasked with submitting a report. The report was to speak about crypto-regulations in the country and how they can be improved with respect to the Indian scenario. It was reported that the report was submitted last month, with the General Elections code of conduct preventing any action being taken. With the General Elections out of the way, the report may be drafted into a bill and tabled in the Budget Hearing this year.
It is speculated that the bill would be passed around June and it is yet unclear whether the committee will create a completely new regulation or amend existing ones.
Regulatory Problems Of A New Asset Class
Crypto is a new asset class altogether and it does not fall under the same rules as existing frameworks.
While an amendment might be the faster way to go at the moment, it will overlook many of the unique characteristics of cryptocurrency. Moreover, there are various types of cryptocurrencies as well, and a one-size-fits-all approach will not work for the market.
One of the biggest challenges for crypto-regulators will come at the Anti-Money Laundering (AML) and KYC level. This comes under the existing Prevention of Money Laundering Act (PMLA), which could be the epicentre of regulatory changes regarding cryptocurrencies.
The PMLA cannot be effectively applied to cryptocurrencies used in illegal transactions as there is no specific law regarding the asset class in the PMLA. The law could be amended, or overarching legislation can be passed, both of which have to be approved by parliament.
A Bigger Responsibility
India is a part of the G20, a group of 20 countries working together for “international economic cooperation”, with their latest focus being around cryptocurrencies.
In their last summit, they agreed to regulate cryptocurrencies across all countries to curb and counter money laundering and financial terrorism. They also argued that these standards are important for crypto-assets, so as to allow for their sustainable growth and use in existing financial systems.
The G20’s regulation keeps in line with what the Financial Action Task Force (FATF) has recommended. The FATF also specifically mentioned AML risks such as anonymity and pseudonymity afforded by crypto, along with the lack of clarity for compliance across the world. The task force wishes to bring the existing financial system’s accountability and enforcement to cryptocurrencies, and establish a central oversight body for the technology.
India, as a prominent member of the G20 and one of the fastest growing economies in the world, has to step up and take action. A summit is also coming up in June and is set to take place in Osaka, Japan, with Modi, Trump and others. The Indian crypto-community has also been vocal about what they want.
Crypto-startups have stated that they want a central governing body to regulate the technology. This is not only for oversight, but also to keep up with future regulation and advancements in the field. Overall, the state of crypto in India seems ready to change, as India takes on a bigger role in the world’s economy.