Discussion paper on crypto policy likely before Sept, says DEA secretary

Economic Affairs Secretary Ajay Seth.

India plans to come out with a discussion paper outlining its policy stance on cryptocurrencies before September, Economic Affairs Secretary Ajay Seth told Moneycontrol in an interview.

The rationale behind the discussion paper is to seek comments and views from relevant stakeholders on the ideas outlined in it. This paper will contain suggestions on the remit of regulations for cryptocurrencies in India as well, Seth added.

“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, so should the remit be more? What should be the policy stance? All that will come out in the discussion paper.”

Back in March 2023, India extended anti-money laundering (AML) and counter-terror financing (CTF) standards to crypto-assets and intermediaries.

“At the moment, an inter-ministerial group, is looking into a wider policy for cryptocurrencies. We expect to come out with the discussion paper before September,” Seth said, adding that the Reserve Bank of India (RBI) as well as Securities and Exchange Board of India (Sebi) are also part of the group.

“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,” he added.

A Reuters story back in May said that Sebi has recommended that several regulators oversee trade in cryptocurrencies, indicating that at least some authorities in the country are open to allowing the use of private virtual assets.

However, unlike Sebi, the RBI maintained that private digital currencies represent a macroeconomic risk, as per the Reuters report.

The move to release a discussion paper on cryptocurrencies comes after G20 member countries during India’s presidency last year endorsed guidelines set forth by the International Monetary Fund (IMF) and the Financial Stability Board (FSB).

The IMF-FSB synthesis paper has warned against a blanket ban on crypto activity citing that such a move would be difficult to enforce.

“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, at the moment that discussion is on,” Seth said, indicating that the architects of the proposed discussion paper may keep this framework in mind.

The roadmap for regulating crypto assets, proposed by the FSB and the IMF, was adopted by the finance ministers and central bank governors (FMCBG) from G20 nations in October.

Cryptocurrencies in India have been subject to much scrutiny with the central bank in April 2018 prohibiting lenders and other financial intermediaries from dealing with crypto users or exchanges. However, this ban was struck down by the Supreme Court in 2020.

Though the government prepared a bill on cryptocurrencies back in 2021 that is said to have proposed a ban on private cryptocurrencies, it has not been introduced till date.