The Indian government should avoid a ban on private cryptocurrencies, according to a report by Indian non-profit organization Centre for Internet and Society (CIS), which has been cited by lawmakers for reference in the past.
The report comes as the Indian government is looking to introduce a crypto bill that will reportedly ban most private cryptocurrencies. But first it needs to be approved by the ruling cabinet and then the parliament. However, recent reports suggest that this process could be delayed by several weeks.
CIS has previously been part of a group that delved into the “Right to Privacy” in India. The Supreme Court of India also cited CIS research during the landmark judgment on “Right to Privacy.”
As an interim solution, the report recommends reiterating that crypto is not legal tender and then taking “steps to classify crypto-assets under the existing financial framework.”
Another interim recommendation is to give existing financial regulators, such as the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) jurisdiction over crypto-assets. For example, classifying crypto-assets as derivatives to grant SEBI jurisdiction, so the regulator could make its existing know-your-customer and anti-money laundering rules applicable to crypto exchanges.
SEBI could also decide to classify crypto as collective investment schemes, which would lead to crypto exchanges issuing SEBI-compliant crypto assets, the report says. Similarly, crypto can also be notified as derivates giving RBI jurisdiction, the report adds.
As a long-term measure, the report recommends that since crypto assets do not fit into any of the existing classifications of financial instruments they need to be regulated through “a specific and standalone regulatory framework.”
The report strongly recommends a specific regulatory structure for stablecoins, one that is held to a higher regulatory standard than other crypto assets. Additionally, the recommendations lean on global consensus on stablecoin regulation that rules applicable to stablecoins should be similar to the rules applicable to banks.
Only crypto assets, not the underlying technology, should be regulated, CIS said in the report. This would allow for further innovation, the report adds.
This is in line with the narrative from Indian Prime Minister Narendra Modi. Last week, Modi said that “We must also jointly shape global norms for emerging technologies like social media and cryptocurrencies so that they are used to empower democracy, not to undermine it.”
The report also suggests a license and registration system for companies that are involved in crypto-related businesses, which would allow state governments to effectively monitor them. Limitations on crypto mining and appropriate taxation were also part of the report’s recommendations.
One of the key recommendations is the establishment of a separate body to oversee and research changes in the crypto market, which would then make recommendations to RBI or SEBI, whichever becomes the eventual regulator.