India to publish crypto policy discussion paper by September 2024

Regulators in India plan to release a discussion paper on the country’s stance on cryptocurrencies by the end of 2024.

The discussion paper will shed light on the government’s stance on crypto, Economic Affairs Secretary Ajay Seth said in a recent interview. The document aims to solicit comments from relevant stakeholders in crafting crypto policy in one of the world’s most populous countries.

“In India, (cryptocurrencies) are regulated only from an AML and EFT perspective. Regulation starts and ends there, it cannot go beyond that, so should there be more jurisdiction? What should be the policy stance? All of these will come out in the discussion paper.”

Ajay Seth, Secretary, Economic Affairs

An inter-ministerial group comprised of multiple regulators is preparing the discussion paper. The group is reportedly exploring “broader policy for cryptocurrencies,” Seth said.

The discussion paper is expected to be released before September.

The group includes the Reserve Bank of India, the country’s central bank, and the Securities and Exchange Board of India, the market regulator.

The RBI has historically opposed allowing cryptocurrencies in India, citing risks to the country’s economic stability. Therefore, instead of regulating cryptocurrencies, the central bank has proposed a complete ban on them.

Meanwhile, India’s securities regulator has taken a more positive stance. SEBI said the country should adopt a multi-agency approach to crypto legislation by May 2024. Proposals submitted to an advisory panel outlined plans to devolve supervisory authority to various agencies, such as the Insurance Regulatory and Development Authority of India.

Seth also pointed to an IMF-FSB synthesis paper published in July 2023 that recommended avoiding an outright ban on digital currencies. Finance ministers and central bank governors (FMCBG) from G20 countries endorsed the global regulator’s proposal in October.

The IMF-FSB proposal came during India’s chairmanship at the G20 summit last year. Seth hinted that these frameworks could be taken into consideration while drafting the policy document.

Sumit Gupta, co-founder of Indian cryptocurrency exchange CoinDCX, praised the move, calling it an “important step” towards regulating the crypto sector.

“As key stakeholders in this sector, we urge the government to actively seek input from local businesses. Engaging with local businesses will ensure that the regulatory framework is robust, inclusive and supportive of innovation,” Gupta told crypto.news.

India currently does not have a crypto regulatory framework but has imposed a 30% tax on profits made through cryptocurrencies and a 1% tax deducted at source. However, this has not stopped regulators from clamping down on the sector.

India’s Financial Intelligence Unit has imposed licensing requirements for cryptocurrency service providers operating in the country, resulting in the blocking of several offshore cryptocurrency exchanges earlier this year.