India seems to be taking its calculated steps into the crypto landscape. Recently a Law Firm called- ‘Nishith Desai Associates’ was invited by the Government of India to present their suggestions on the cryptocurrency regulations. The law firm was called after it submitted a proposal to the Indian Government for the regulatory framework for the digital currency. The paper was submitted to the Secretary of Economic Affairs- Subhash Chandra Garg. The Ministry of Finance confirmed to the Parliament of India that the government committee has been investing a lot of efforts in building a structure for the digital currencies. As per the reports obtained from ‘News.Bitcoin.com’, the committee has been working on the national cryptocurrency and licensing of the crypto businesses.
In the proposal, some points that have touched are steering clear of crypto prohibition, opting for a balanced way of dealing with the virtual currency related matters, and the self-regulation of the crypto industry.
Suggestions on self-regulation of the crypto industry :
The paper was co-authored by three lawyers. One of them- Mr. Jaideep Reddy said that the government of India is not bound to reply back or to agree to any suggestions made by them or public as a whole. He further added-
“Our submission was responded to by the Finance Ministry which was kind enough to invite us to present our suggestions. The presentation mainly consisted of us explaining the suggestions made in the paper. […] They listened to our proposal with interest.”
The proposal was prepared as an independent effort. The paper reads that it was ‘purely in public interest.’ The Law Firm ‘Nishith Desai Associates’ has been in the news for representing the ‘Internet and Mobile Association of India (IAMAI) in front of the Supreme Court of the country against Reserve Bank of India (RBI). The dispute is over RBI banning the banks of India from offering any services to the businesses that are based on the cryptocurrency.
Suggestions on a balanced way of dealing with the virtual currency related matters-
In the paper, one would find that there is a special emphasis that there is a need for regulation and not prohibition. The proposal rather goes to various lengths on why a total ban on the cryptocurrency is not a favorable idea for the country’s growth. In the paper, it has been mentioned that-
“History has taught us that such technologies (blockchain) should be regulated and not banned since banning is likely to be counter-productive and may also suffer from legal infirmities.”
The paper explained how a balanced approach will prove to be far more beneficial. By embracing the blockchain technology it will boost several benefits of the technology and will also help in reducing any risks when we look at the ‘international consensus.’
Further, the paper shared ways of licensing crypto businesses in the country. As per the reports from News.Bitcoin.com, on this matter Reddy further said-
“This may be done either by introducing new legislation or framing administrative regulations under existing legislations.” […] As per him one way- “is to introduce a simple government notification bringing crypto-asset business activity under the Prevention of Money Laundering Act. With one fell swoop, that would bring crypto asset activity within a well-established AML regime, operating on par with the financial sector and the jewellery industry, for instance.”
The next aspect the paper covers is the variety of crypto assets :
As per the three authors of the paper, it would be wise to divide the crypto assets into three types i.e. ‘payment tokens, security tokens, and utility tokens’. The paper explains-
“For the purpose of legal analysis, all crypto assets are not alike, and the implications of each should be assessed on a case by case basis. Broadly, crypto assets can be considered to be of three types- payment tokens, security tokens, and utility tokens.”
The proposal suggests that the second type of the crypto assets i.e. ‘security tokens’ should be taken care and regulated by the ‘Securities and Exchange Board of India (SEBI), as per the ‘Companies Act.’
The lawyer further elaborated-
“The trading activity with regard to all other crypto assets falls in something of a regulatory vacuum, although existing laws like the Consumer Protection Act continue to apply to a significant extent.”
The ‘vacuum’ which the lawyer is referring to can be nailed down with help of KYC Process that stands for ‘Know your customer’ and Anti Money Laundering (AML) process. The lawyer also suggested using a ‘licensing regime, for crypto asset business activity.’
Last but not the least the final aspect of the paper was ‘Self Regulation’-
Back in 2017, the authors of the paper submitted a paper about self-regulations to the previous government committee on crypto assets. For the previous paper, Reddy told News.Bitcoin.com-
“However, the previous committee’s report was not made public. […] Therefore, we do not know how that committee responded to the suggestion for self-regulation.”
The report explained that the suggestions on self-regulation were initially constructed for DABFI i.e. Digital Asset and Blockchain Foundation of India. DAFBI was formed by ‘Zebpay, Unocin, Coinsecure and Seachtrade.’ The paper further said-
“DAFBI has since then been subsumed into the Internet and Mobile Association of India (IAMAI) as of November 2017.”
The report was concluded with :
“These include mandating compliance with KYC, AML norms. […] and net worth requirements based on those prescribed by the RBI for regulated entities. The draft creates a certification regime and mandates various consumer protection features including capital adequacy, audit, and disclosures.”
Future Moves of India in the Crypto land :
Growing India is really a place to watch out for. In December last year, India participated in the G20 summit that took place in Buenos Aires in December. 2022 will see India to host the G20 summit. The Prime Minister of India, Narendra Modi, announced this news at the closing of G20 summit in Buenos Aires. Initially, Italy was to host the G20 Summit in 2022. Indian PM, therefore, thanked Italy for allowing India to host the coming G20 Summit. He said:
“In 2022 India completes 75 years since Independence, In that special year, India looks forward to welcoming the world to the G20 Summit! Come to India, the world’s fastest-growing large economy! Know India’s rich history and diversity, and experience the warm Indian hospitality.” Modi on Twitter.
In his speech, Modi addressed the topics that included global economy, trade tension, crude oil prices, terrorism, oil price volatility, the increasing financial vulnerabilities, and so on. He also made a special mention on the need for a reform in the World Trade Organization (WTO.) He also encouraged the strengthening of the United Nations’ counter Terrorism network. He urged the BRICS and G20 nations to work hand in hand towards the common anti-terrorism goal.