The Indian government is preparing to introduce comprehensive regulations for the crypto sector, local media reported on August 22.
Sources familiar with the matter said the first step in the plan is to release a consultation paper in the coming weeks that will invite stakeholders to provide their views. The move underscores the government’s commitment to establishing a regulatory framework for digital currencies in India.
This development follows Finance Minister Nirmala Sitharaman’s statement in October 2023, where she stressed that G20 countries had reached a consensus on the need for unified regulation of cryptocurrencies.
Sitharaman said at the time:
“There is now a global understanding that we need to coordinate our regulatory approaches to cryptocurrencies. However, each country will also need to adapt these regulations to its specific legislative environment.”
Consultation document
A group led by the secretary of the Department of Economic Affairs (DEA) is leading efforts to draft the consultation paper, which is expected to be released between September and October.
The paper is expected to cover various aspects of cryptocurrency regulation, including identifying responsible regulatory bodies, describing the necessary components of a regulatory framework, and proposing a timeline for implementation.
The move is part of India’s broader strategy to mitigate risks associated with cryptocurrencies, particularly in emerging economies where financial stability concerns are heightened.
In September 2023, Economic Affairs Secretary Ajay Seth said the G20 discussions had laid the foundation for national policies. He acknowledged the significant risks posed by cryptocurrencies, particularly in developing markets, and stressed the importance of putting in place robust regulatory mechanisms.
Preliminary steps
India has already taken preliminary steps to regulate the sector and has established new registration requirements for crypto companies wishing to operate in the country.
In 2023, the government banned nine offshore crypto exchanges, including Binance, for violating the Prevention of Money Laundering Act (PMLA), 2002. The exchange recently made a comeback in the Indian market after successfully meeting the new registration requirements set by the Financial Intelligence Unit.
The use of cryptocurrencies in India has seen significant growth despite regulatory uncertainties and a stringent tax environment. By 2024, an estimated 115 million Indians are involved in cryptocurrency investments, which is about 15% of the population aged 18-60.
India has thus emerged as one of the largest digital asset markets in the world. Young investors, especially those under 30, are driving this growth, with many viewing digital assets as a long-term investment opportunity.
