After putting strong crypto legislation, the Indian government is now drafting a consultation paper to address key crypto concerns as part of its efforts to bring greater regulatory clarity around the digital asset class.
Drafting the Consultation Paper
Earlier this week, local publication CNBCTV18 stated that the Secretary of the Department of Economic Affairs is currently heading the panel on crypto regulatory affairs and would soon be publishing a consultation paper, slated for launch between September and October. The Indian government will initiate measures to boost its domestic crypto policy as it struggles to juggle between crypto innovation and regulatory oversight. As a result, it has also invited stakeholders in order to provide feedback for the same.
From Crypto Ban to Regulation
The Indian crypto community is actually quite powerful and with its continuous support for digital assets, they have forced the government to have a regulatory look at this rapidly emerging sector. India has had a very complicated relationship with cryptocurrencies with the central bank – Reserve Bank of India (RBI) – imposing a ban on financial institutions dealing with crypto businesses. However, in 2020, the Supreme Court overturned this decision allowing crypto trading to resume despite the regulatory challenges. However, the RBI has also shared concerns over the macroeconomic risks posed by privately issued cryptocurrencies, particularly stablecoins. Furthermore, the central bank had also advocated for a ban on digital assets pegged to fiat currencies such as the USD, or other commodities such as Gold, citing their threat to the nation’s financial stability. The newly proposed regulatory paper comes soon after the Indian government’s ban on foreign crypto exchanges in December 2023. Nine major crypto exchanges including KuCoin, Binance, Kraken, Huobi, Bitstamp, Bittrex, Gate.io, MEXC Global, and Bitfinex were banned on charges of violating India’s anti-money laundering (AML) regulations. However, Binance resumed its operations in India last week following a $2.5 million penalty settlement.
Work on the Digital Rupee Project
As Ripple plans to expand its central bank digital currency (CBDC) platform further, central banks are showing keen interest in digitizing their financial systems. This technology is designed to enable central banks and governments to manage digital currencies securely and efficiently. In India, Ripple’s partnerships are playing a pivotal role in transforming the digital payments landscape. Since 2018, Ripple has been in partnership with Kotak Mahindra Bank, one of India’s largest private banks.
India continues its journey from the crypto ban to regulation, striving to find a balance between innovation and oversight. Work on projects like the digital rupee shows that the country is actively seeking ways to integrate digital assets into its financial system.
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