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Nov 15, 2021
Laws regulating cryptocurrencies are in the offing. In the meanwhile, industry bodies are using own rules to enable online KYC verification, check fraud and market manipulation. Trending outlookindia.com Published: 15 Nov 2021, Updated: 15 Nov 2021 9:36 am A study by crypto research and intelligence firm Crebaco reveals that 105 million Indians have invested in some kind of digital token. Recently, investments in cryptocurrencies in India hit Rs 75,000 crore. However, despite the huge investor interest, cryptocurrencies are currently unregulated in India. Industry bodies are using Codes of Conduct to ensure compliance with tax and other laws by members, while some regulations control cryptocurrency advisory. A recent regulation from the Securities and Exchange Board of India (Sebi) bars investment advisors from advising on unregulated instruments, which means that Registered Investment Advisors (RIAs) cannot provide clients any advice on crypto investments. However, cryptocurrencies are not illegal in India. Current Situation: “Cryptocurrency is currently an unregulated entity in our country, which means that Sebi has no control over it whatsoever,” says Manav Bajaj, Founder, Panther Quant, an algorithmic crypto trading platform built on blockchain. Players are hoping for pro-crypto regulations. “We are hopeful that the government will bring favourable regulations to foster the cryptocurrency space and the technologies, like blockchain. The regulations will bring certainty for interested investors who have been hesitant so far due to the lack of clear regulations and encourage more cryptocurrency adoption,” says Sharan Nair, Chief Business Officer, CoinSwitch Kuber. From the Magazine Also, since RIAs are not allowed to advise on cryptocurrencies, it is not easy to find someone who can give investors proper investment advice. IAMAI Code Of Conduct: The Blockchain and Crypto Assets Council (BACC), a part of the industry body Internet and Mobile Association of India (IAMAI), has set up a self-regulatory Code of Conduct that lays down rules that members can voluntarily comply with. Recently, BACC brought CoinSwitch founder and CEO Ashish Singhal and CoinDCX co-founder and CEO Sumit Gupta on board. The Council’s Code of Conduct aims to enable online KYC verification for all customers, check fraud and market manipulation, ensure compliance with law enforcement and tax authorities and promote investor education, among others. “A Code of Conduct is basically a standard list of best practices to be followed by exchanges to ensure that existing laws like PMLA, AML, FEMA (Prevention of Money Laundering Act, Anti Money Laundering, Foreign Exchange Management Act) and KYC norms are not violated. These are not specific to crypto but given that crypto is a distant financial product, these are decided keeping the laws for financial products in mind,” says Naimish Sanghvi, Founder, Coin Crunch India, a cryptocurrency news website. The Early Days: From the initial days itself, RBI has cautioned people about the risks involved in investing in cryptocurrencies. Way back in 2003, the central bank had warned people about how they could lose money if they invested in cryptocurrencies. These threats involved loss of sensitive data, malware attacks and investors’ wallets getting compromised. Further, since there is no regulation on cryptocurrencies, if faced with any dispute or fraud, users would have nowhere to turn to. The RBI has maintained its cautionary stance on cryptocurrencies since then, even as investing in cryptocurrencies is gaining popularity in India. In April 2018, RBI had essentially banned cryptocurrencies in India by mandating that one could not use the rupee to buy cryptocurrencies or link their bank accounts to cryptocurrency platforms. However, the Supreme Court reversed the ban in March 2020. Do Your Own Research: If you still decide to invest in cryptocurrencies, the only way to invest safely is to do your own research. One also needs to understand that cryptocurrency prices undergo huge price fluctuations as it is not backed by an asset. “New crypto investors should begin their journey by finding reputable sources and educating themselves. They should research the exchanges and their features before deciding on one. This will help them manage their expectations and determine the amount of money they can afford to invest in cryptocurrency,” adds Nair. Going ahead, the central government is said to be working on introducing regulations for cryptocurrencies soon. “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is also going to be introduced, which is a step forward in recognising and regulating cryptocurrencies in India,” says Bajaj.