The Indian government is taking steps to introduce comprehensive regulations for the cryptocurrency sector, as reported by local media on Aug. 22. The first move in this plan is to release a consultation paper in the upcoming weeks to gather feedback from stakeholders. This initiative showcases the government’s dedication to establishing a regulatory framework for digital currencies in India.
Finance Minister Nirmala Sitharaman mentioned in October 2023 that G20 nations had agreed on the necessity for unified crypto regulation. She emphasized the need to coordinate regulatory approaches globally, while also tailoring regulations to suit each country’s legislative environment. A panel, led by the Secretary of the Department of Economic Affairs (DEA), is leading the effort to draft the consultation paper, which is expected to be published between September and October.
Mitigating Risks and Building Regulatory Mechanisms
The consultation paper is set to cover various aspects of crypto regulation, such as identifying responsible regulatory bodies, outlining necessary components of a regulatory framework, and proposing an implementation timeline. This move is part of India’s broader strategy to address risks associated with cryptocurrencies, especially in emerging economies with heightened financial stability concerns. Economic Affairs Secretary Ajay Seth underscored the risks that cryptocurrencies pose, particularly in developing markets, and highlighted the importance of establishing robust regulatory mechanisms.
India has already taken initial steps towards regulating the crypto sector by implementing new registration requirements for crypto firms operating in the country. In 2023, the government banned nine offshore crypto platforms, including Binance, for violating the 2002 Prevention of Money Laundering Act (PMLA). Binance later re-entered the Indian market after meeting the new registration requirements set by the Financial Intelligence Unit.
Despite regulatory uncertainties and a strict tax environment, crypto usage in India has witnessed considerable growth. An estimated 115 million Indians are involved in crypto investments as of 2024, representing about 15% of the population aged 18 to 60. India has emerged as one of the largest markets for digital assets globally, with a significant number of young investors, particularly those under 30, viewing digital assets as a long-term investment opportunity.
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