India Potentially Looking to Switch Gears, SEBI Looks to Classify and Regulate Cryptocurrencies as an Asset Class
Rumours are rife that India is considering classifying Bitcoin as an asset class as the prospect for cryptocurrency adoption looks promising.
India Rumored to Recognize Bitcoin as an Asset Class
One of the countries with the harshest treatment towards the crypto market is starting to change its stance. The New Indian Express reported some promising news in the country’s crypto treatment in an article on June 10. Citing unnamed sources, the news portal announced that the Securities and Exchange Board of India (SEBI) will oversee the regulation of crypto. This is an important step in the classification of crypto as an asset class in the country.
Asset classification is important In India because it identifies the regulatory framework for the legal treatment of an asset. This includes the identification of the government agency that will be responsible for the regulation and policy of the asset class and the associated activities. Secondly, classification is also important for taxation. For instance, a property will be treated differently from a commodity or currency.
This piece of news, if true, will be a major step towards recognizing the top cryptocurrency. The Reserve Bank of India has been known for its anti-cryptocurrency stance. In February 2021, the Governor of Reserve Bank of India Shaktikanta Das said that the central bank has major concerns about cryptocurrencies and he cautioned users against the risk that could lead to financial instability.
History of Hostility Towards Crypto Assets
There is a dire need for access to financial facilities in India. And India’s 1.392 billion population--second-most in the world-- has vast potential for crypto adoption. However, authorities across the subcontinent have always been hostile towards cryptocurrencies.
April 6, 2018 - India’s Central Bank announced a ban on the sale or purchase of cryptocurrencies
March 4, 2020 - India’s Supreme Court quashed the ban stating that cryptocurrency, although unregulated, is not illegal in India.
May 31, 2021 - India’s Central Bank confirmed that the 2018 law is no longer effective and should not be cited.
Although the central bank did clarify the confusion, it has left the door open for the local banks to manage their own affairs. Banks can still exercise stringent anti-money laundering tactics or even stricter Know-Your-Customer protocols. These tactics may still deny many potential investors of India from participating in the crypto market. Unless there is a clear and concise regulatory framework, Indian participants in the crypto market will still be jittery.
Why it Matters More for Countries Like India
The rumor published in the New Indian Express, even if true, does not immediately usher in mass participation in the crypto market. Classification of cryptocurrency as an asset class will be a necessary first step. Then the relevant government agency will have to step in to create a policy framework and build the regulation around the framework. Only then would there be confidence in the market amongst retailers and institutions to participate.
India can no longer turn a blind eye to the events that are unfolding in the world. There are talks of issuing sovereign digital currency in the country. This should not detract from efforts to recognize and regulate an already existing industry.
Regulatory recognition is important for industry players to participate in a meaningful way. In India, there is a disproportionate growth in access to financial facilities. The disparity is a disconcerting one as the country falls behind in terms of financial inclusion.
Cryptocurrency is the key to bring financial access to these people as it is both inclusive and revolutionary. Access in this modern-day no longer requires a physical bank. Access only requires mobile connectivity and a favorable regulatory framework. India needs crypto more than crypto needs India.
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