Preparing to regulate digital tokens: Reserve Bank has started the exercise, may get approval for cryptocurrency business

Posted on 16th Nov 2021 by rohit kumar

Sooner or later, cryptocurrencies in India may get approved with terms and conditions. This is because the Reserve Bank of India (RBI) had a meeting with important people related to the cryptocurrency business on 2 November. After this, the central government held a meeting with RBI and other agencies on Saturday in this regard.

 

According to the information, RBI had called this meeting at very short notice. The meeting convened on November 2 was attended by senior RBI officials, executives from three crypto exchanges, crypto brokers, and officials from India Tech. All of them prepared a white paper on crypto. It is believed that even though crypto is completely banned in China, it will be approved in India with some controls and conditions.

 

Discussion on KYC framework and possibilities of illegal transactions

The KYC framework and apprehensions of illegal transactions were also discussed in this meeting. In addition to concerns about money laundering, the RBI is also concerned about potential financial instability if crypto volumes increase over time. About 20 million investors in India are estimated to hold crypto coins worth $ 4-5 billion. Well, now there are thousands of cryptocurrencies, not just bitcoins. If the supply of crypto continues to grow, it could be a challenge to monetary policy at some level.

 

Many people in the industry want the cryptocurrency to be bought only from the exchanges that are in India. Like banks, these exchanges should be allowed for FDI (foreign direct investment) up to 74%. Fund transactions under the guise of crypto have been voiced by many regulators outside India as well.

 

Rules are not easy to enforce

One banker said that enforcement of crypto regulations is not easy. This would require the disclosure of all crypto holdings in the hardware. Only those businesses which can be monitored will be allowed. The industry wants crypto to be classified as a current asset and not a currency so that it can be easily converted into cash. At the same time, the industry is also hoping that the government and RBI will clear the cloud of doubts on some other issues.

 

Will focus on many things

 

Among the key points related to the issue is whether the gains made should be treated as capital gains or business income and taxed.

 

Will rigging buying crypto from foreign exchanges and other sellers violate the Foreign Exchange Management Act (FEMA) and who will regulate crypto?

 

Since India has many financial regulators like IRDAI for insurance, SEBI for mutual funds and the stock market, Reserve Bank for banking and other payments.

So it is not yet decided who will regulate it.

 

Exchange is only a platform

 

Currency exchanges say that they are just a platform to reconcile buyers and sellers. Do not buy and supply crypto. Under the recent rules, if someone brings coins from abroad and sells them in his country, then it is not possible to easily trace them.

 

Crypto prices fluctuate a lot. For example, in the last 24 hours, the price of a currency called Husky has increased by 67 thousand percent. This brings its market cap to $1.5 billion. Earlier the prices of SQUID, Shiba, and Cocoswap had also increased similarly.

 

Prime Minister had a meeting on Saturday

Two days ago, the central government had a meeting on the issue of all illegal crypto exchanges operating in the country. In this, Prime Minister Narendra Modi asked for strict action against these crypto exchanges which became the means of terror funding for terrorists and money laundering for black money hoarders. On Saturday, the PM held a meeting with the Ministry of Finance, RBI, and the Ministry of Home Affairs regarding this. In this, Modi asked what steps have been taken to regularize the cryptocurrency.

 

Review on the issue of cryptocurrency

In the meeting, all the issues related to cryptocurrency and related were reviewed. It was decided that opaque advertising misleading the youth in the name of cryptocurrency should be stopped. In the meeting, the issues that emerged after consultation with crypto experts from across the country and the world were discussed by RBI, Ministry of Finance, and Ministry of Home Affairs.

 

RBI Governor Shaktikanta Das had warned

Two days ago, RBI Governor Shaktikanta Das had warned about digital currency. He described it as a very serious matter and indicated that some big steps would be taken soon. RBI and stock market regulator SEBI are working together to prepare a framework to tighten the noose on cryptocurrency.

 

The claim was made on 3 November

In fact, on November 3, several organizations and crypto businessmen put together two full-page advertisements in an English newspaper. In this, it was claimed that crores of Indians have invested 6 lakh crore rupees in crypto. It is regulated. The regulation has the Internet and Mobile Association of India (IMAI) and others that are self-regulatory bodies.

 

Edelweiss Mutual Fund CEO Radhika Gupta said that financial assets cannot be regulated by IMAI. It is not known what the investor base and exact size of the industry is, he said. If it is an investment of Rs 6 lakh crore, it should be regulated very quickly.