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India working on 5-point crypto legislation as ban is ruled out

India working on 5-point crypto legislation as ban is ruled out

India is in the process of developing a regulatory framework for cryptocurrencies based on the joint recommendations of the International Monetary Fund (IMF) and the Financial Stability Board (FSB). This framework could lead to the implementation of legal legislation within the next five to six months. Sidharth Sogani, CEO of Crebaco, a company that has collaborated with government agencies and ministries, stated that the Indian government is working on a five-point legislative framework for cryptocurrencies with a global perspective.

Recently, India participated in the G20 summit where several important economic announcements were made. Of particular significance to the crypto community was the IMF-FSB joint recommendations for crypto regulations, which were welcomed by India and other G20 nations.

The recommendations put forth by IMF-FSB focus on regulating the crypto market rather than imposing a complete ban. These recommendations provide a set of regulatory guidelines and suggestions that G20 countries can utilize to develop their own independent yet collaborative crypto legislation.

Cointelegraph reached out to Crebaco, a blockchain analytics firm that has provided consulting services to various G20 committees and nations, to gain insight into India’s approach to cryptocurrencies. Sogani informed Cointelegraph that based on their interactions with government officials, India is currently working on a five-point regulatory approach that emphasizes global cooperation on certain aspects, such as crypto taxation.

In terms of the five-point framework, Sogani highlighted the following areas of focus for the government:

  • Establishing advanced Know Your Customer (KYC) processes for crypto companies, including compliance with the Foreign Account Tax Compliance Act and existing Anti-Money Laundering standards.
  • Requiring crypto platforms to conduct real-time proof-of-reserve audits for regulatory purposes.
  • Implementing a uniform taxation policy across nations.
  • Granting crypto exchanges a status similar to authorized dealers (like banks) under the guidelines of the Reserve Bank of India (RBI).
  • Requiring key positions, such as a Money Laundering Reporting Officer, to be mandatory for crypto platforms.

Sogani noted that the global community has realized that banning cryptocurrencies is ineffective and that many countries are now leaning towards a regulatory approach rather than a complete ban. The United States and Europe, for example, already have specific crypto regulations in place, while India has taken a taxation route. Sogani further added:

“Regulations are inevitable; this ecosystem has grown substantially without regulations. Just imagine how well it would grow with proper regulations in place. Also, regulated markets reduce the risks of scams and illicit activities.”

India has been advocating for a global approach to crypto regulations for some time now. During the recent G20 summit, Prime Minister Narendra Modi reiterated this position. An official from the finance ministry confirmed that India has taken the IMF-FSB recommendations into account and will focus on formulating regulations based on them in the coming months.

The finance ministry official stated that the IMF-FSB recommendations provide a good “framework to decide our own way forward. The foundation is ready, and it is up to us to decide how far we want to go in the coming months and then make a decision.”

The official also clarified that banning cryptocurrencies is no longer a viable option and acknowledged that “if you want to ban it [cryptocurrency], go ahead and ban it. But if other countries are not banning it, it will be extremely difficult for one country to ban it.”

Currently, India does not have specific regulations for cryptocurrencies, although the country implemented a 30% tax on crypto gains in 2022. However, the joint recommendations for crypto regulations and the finance ministry’s assurance that a regulatory framework could materialize into comprehensive legislation in the near future provide optimism for the crypto industry in India.