India’s SEBI Open to Crypto Oversight, RBI Seeks Stablecoin Ban
The Securities and Exchange Board of India (SEBI) proposed a collaborative effort among regulators to oversee cryptocurrency trading on Thursday, while the Reserve Bank of India (RBI) seeks a stablecoin ban. SEBI’s proposition signals a willingness to embrace private virtual assets – an approach previously not seen in India. The RBI, however, views private digital currencies as a potential macroeconomic risk.
According to a Reuters report, these suggestions were made to a “government panel” tasked with formulating policy for the finance ministry to consider.
SEBI’s Multi-Regulator Plan vs. RBI’s Ban Proposal
SEBI recommended that various regulators oversee cryptocurrency-related activities falling under their domain in its proposition. Additionally, it suggested avoiding a single unified regulator for digital assets. SEBI stated it could monitor cryptocurrencies categorized as securities and Initial Coin Offerings (ICOs). SEBI could also issue licenses for equity market-related products. This would be similar to the US, where securities and crypto exchanges are regulated by the Securities and Exchange Commission (SEC).
The Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA) should regulate virtual assets related to insurance and pensions, according to the proposal. It also recommended that the grievances of investors trading in cryptocurrencies should be resolved under India’s Consumer Protection Act.
The RBI is Anti-Crypto
Since 2018, India has adopted a tough stance on cryptocurrencies. The RBI prohibited lenders and financial intermediaries from dealing with crypto users or exchanges. The Supreme Court later struck down this move, however. In 2021, the government prepared a bill that would have banned cryptocurrencies, though it has not been introduced. In 2023, when it was president of the G20, the country called for a global framework to regulate such assets.
The RBI is still in favor of a ban on stablecoins, believing that digital currencies represent a macroeconomic risk. The Hindu reported that RBI Deputy Governor T. Rabi Sankar believes that stablecoins, particularly those linked to economies like the US and Europe, can be risky.
“We have to be very careful about allowing these sorts of instruments… From the past experience in other countries, it is an existential threat to policy sovereignty,” he said.
The RBI further highlighted concerns about cryptocurrencies, citing risks like tax evasion and peer-to-peer (P2P) decentralized activities relying on voluntary compliance. It also expressed worry about losing “seigniorage,” income from money creation.
After the Supreme Court overturned its 2018 orders, the RBI urged strict compliance with regulations, excluding cryptocurrencies from India’s financial system. Despite this, cryptocurrency trade continued, prompting the government to introduce a crypto tax in 2022. Later, all exchanges were mandated to register locally to facilitate crypto transactions. Although there is no public announcement, Reuters added that the panel could submit its report by June.
