India to decide on its crypto policy by September

India is getting ready to roll out a discussion paper on its cryptocurrency policy before September. Economic Affairs Secretary Ajay Seth shared this plan in a recent interview. 

The purpose is to gather feedback from various stakeholders on how digital assets should be regulated in the country. 

Seth made it clear that the current regulations focus mainly on anti-money laundering (AML) and counter-terror financing (CTF).

Last year, India extended its AML and CTF standards to include crypto-assets and intermediaries. Seth emphasized that this discussion paper wants to explore whether these regulations should be broadened. In his words:

“In India, it [cryptocurrencies] is being regulated from the perspective of AML and EFT alone. Regulation starts and ends there, it cannot be beyond that.”

Multiple regulators weigh in

An inter-ministerial group, which includes the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), is working on this paper. The idea is to have a more comprehensive policy. 

SEBI has suggested that multiple regulators should oversee cryptocurrency trading. However, the RBI has been cautious, seeing private cryptocurrencies as a risk to the economy. Seth added that;

“The policy stance is how does one consult relevant stakeholders, so it is to come out in the open and say here is a discussion paper, these are the issues and then stakeholders will give their views.”

G20 guidelines and the outlook

The decision to create this discussion paper comes after G20 member countries, under India’s presidency last year, endorsed guidelines set by the International Monetary Fund (IMF) and the Financial Stability Board (FSB). 

The IMF-FSB synthesis paper advised against a blanket ban on crypto activities, noting that such a ban would be hard to enforce. Seth mentioned that the proposed discussion paper might consider this international framework.

“If you recall, the G20 came out with an agreed roadmap that gives a good framework of how each country should assess risks to its own economy and what it sees as a potential use case.”

India’s relationship with crypto is a bit rocky. In April 2018, the central bank prohibited lenders and other financial intermediaries from dealing with crypto users or exchanges. Though the Supreme Court overturned this ban in 2020.