India’s Securities and Exchange Board of India (SEBI) has proposed a multi-agency approach for the regulation of the cryptocurrency sector, suggesting that oversight should be distributed among various regulators. This proposal, disclosed by Reuters, was presented to an advisory panel for India’s finance ministry.
According to the proposal, SEBI would oversee cryptocurrencies classified as securities, manage initial coin offerings, and issue licenses for related products. The Insurance Regulatory and Development Authority of India would handle all crypto-related insurance cases, while the Pension Fund Regulatory and Development Authority would regulate pension-related matters involving cryptocurrencies. Additionally, investor disputes would fall under the nation’s Consumer Protection Act.
The Reserve Bank of India (RBI) was proposed as the regulatory body for fiat-backed stablecoins, although the RBI has expressed a more skeptical stance towards cryptocurrencies. Sources indicate that the RBI supports an outright ban on stablecoins, citing concerns about tax evasion and the risks decentralized peer-to-peer transactions pose to financial stability. The RBI also argues that cryptocurrencies could lead to losses in revenue generated from money creation by central banks.
Dilip Chenoy, chairman of the Bharat Web3 Association (BWA), described the proposal as a significant first step toward domestic legislation for the sector. He noted that the proposal to form an inter-ministerial body to manage Virtual Digital Assets (VDAs) aligns with the industry’s aspirations, given the diverse applications of these assets. Chenoy added that the government has invited industry input to help shape the nation’s regulatory approach, and the BWA is currently drafting a comprehensive document to this effect.
In parallel, Indian regulators are pushing for foreign cryptocurrency service providers to be licensed under the Financial Intelligence Unit (FIU). As of now, only KuCoin and Binance have complied with these requirements. The FIU has been active in promoting compliance among market participants. FIU Director Vivek Aggarwal emphasized the importance of adhering to Anti Money Laundering and Countering the Financing of Terrorism (AML/CFT) frameworks at a recent workshop for Virtual Asset Service Providers (VASPs).
This proposal from SEBI represents a coordinated effort to regulate the rapidly growing cryptocurrency sector in India, balancing innovation with the need for financial stability and investor protection.
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