Cryptocurrency exchanges have communicated to the government that market regulator Securities and Exchange Board of India (Sebi) is more suited to regulate the space than the Reserve Bank of India (RBI).
Exchanges reasoned that cryptocurrency assets, such as Bitcoin and Ethereum, are closer to commodities than currencies, The Economic Times reported. The exchanges also proposed a new a entity to regulate cryptocurrencies.
Moneycontrol could not independently verify the story.
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"Every industry needs a healthy regulatory environment for sustainable growth and the crypto industry being a fairly new concept needs support from RBI and Sebi both. Under Sebi and RBI, a hybrid regulatory body can be created which will be responsible for regulating crypto exchange," Shivam Thakral, CEO of crypto exchange BuyUcoin told The Economic Times.
Banks have recently become cautious about cryptocurrency-related transactions amid regulatory uncertainty.
Investors who hold bank accounts with private and public sector banks have been unable to deposit or withdraw money from their cryptocurrency accounts over the past few weeks.
The central bank had banned cryptocurrency in 2018, but the Supreme Court in March 2020 quashed the order in March 2020.
The sharp surge in the price of Bitcoin, in particular, has led to an increased interest in digital currencies.
However, it is so far unclear if cryptocurrencies are a currency, commodity, service or closer to equity, the report added.
"This will entirely depend on how the government plans to utilise the cryptocurrency and blockchain industry, but the easiest way to regulate it currently would be to classify it under Sebi as their norms do align in some ways with crypto," Monark Modi, founder of cryptocurrency exchange Bitex told the publication.