The consultation paper is being led by the Secretary of the Department of Economic Affairs, who is heading a special panel tasked with drafting the document.
According to a report from CNBCTV18, the release of the consultation paper is expected between September and October this year.
This initiative reflects the Indian government’s commitment to addressing key issues related to crypto while seeking input from various parties involved in the industry.
This move follows a tumultuous history of crypto regulation in India. In 2018, the Reserve Bank of India (RBI) imposed a ban on financial institutions dealing with crypto assets, a measure that was later overturned by the Supreme Court in 2020.
The lifting of the ban allowed crypto trading to resume in India, but regulatory concerns persisted, particularly regarding the macroeconomic risks associated with digital assets such as stablecoins tied to fiat currencies or commodities.
Stablecoins, in particular, have been a major focus in this policy discussion. The RBI had previously called for a ban on digital assets pegged to fiat currencies, such as the US dollar, and commodities like gold.
The concerns center on the potential macroeconomic risks posed by stablecoins and their impact on the stability of the national financial system.
Therefore, the consultation paper aims to outline a regulatory framework that can effectively address these concerns.
Additionally, the Indian government’s decisive action against offshore crypto exchanges underscores the urgency in addressing regulatory issues.
Last December, India imposed bans on nine major crypto exchanges, including Binance, KuCoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex, due to alleged violations of India’s anti-money laundering policies.
The Financial Intelligence Unit of India (FIU) was responsible for enforcing these bans, effectively barring these exchanges from operating in the country.
In response to the ban, Binance, one of the largest affected exchanges, paid a $2.25 million fine and registered with the FIU, allowing it to resume operations in the Indian market.
This action demonstrates how the Indian government is working to enforce regulatory compliance while still providing opportunities for the crypto industry to operate legally within the country.
This initiative also forms part of India’s response to global developments related to crypto. During last year’s G20 Summit, Indian Prime Minister Narendra Modi called for the establishment of a global framework to regulate crypto, artificial intelligence, and other emerging technologies.
This shows that India is not only focused on domestic regulation but also aims to contribute to the formation of more consistent global regulatory standards for these technologies.
The consultation paper is expected to identify and address key issues in crypto regulation, including the macroeconomic risks posed by stablecoins, and ensure that the policies implemented not only support innovation but also protect financial stability and public interest.
By inviting feedback from various stakeholders, the Indian government aims to create a balanced and responsive policy framework that addresses the challenges faced in the rapidly evolving crypto ecosystem.
Overall, this latest step demonstrates India’s determination to strengthen its crypto regulatory framework.
By inviting stakeholders to participate in the consultation process, India seeks to ensure that the policies developed will meet the industry’s needs while maintaining the security and stability of the financial system.
This is a crucial step in navigating the challenges associated with digital assets and ensuring that India remains at the forefront of technological innovation while upholding necessary oversight.
