India's burgeoning crypto industry has been keenly awaiting a comprehensive regulatory framework to ensure the safe establishment and growth of its businesses. Unlike regions such as the European Union (EU) and the United Arab Emirates (UAE), India has yet to unveil a detailed national rulebook to regulate cryptocurrency. This regulatory ambiguity has left many in the industry looking for clarity and direction. Recently, a written response to the Lok Sabha from Minister of State for Finance, Pankaj Chaudhary, provided some insights into the government's position to regulate cryptocurrency.

Current Efforts to Regulate Cryptocurrency

In his response, Chaudhary addressed queries from Member of Parliament GM Harish Balayogi about the government’s stance on the cryptocurrency sector. He clarified that there are no immediate plans to introduce legislation specifically aimed at regulating cryptocurrency sales and purchases. Instead, the government is focusing on a different approach to oversight.

Chaudhary revealed that the Financial Intelligence Unit India (FIU-IND) has been authorized to designate Virtual Digital Asset Service Providers (VDSAPs) as Reporting Entities (RE) under the Prevention of Money Laundering Act, 2002 (PMLA). This move is designed to enhance oversight in areas such as Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT). By including VDSAPs in the regulatory framework, the government aims to improve transparency and mitigate risks associated with crypto transactions.

Regulate Cryptocurrency
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Balayogi further inquired whether the government had conducted research on the current status of Virtual Digital Assets (VDAs) and the number of crypto firms operating in India. Chaudhary's response indicated that, due to the unregulated nature of the sector, the government does not collect specific data on crypto-related activities. This lack of comprehensive data collection underscores the ongoing challenges in monitoring and regulating the fast-evolving crypto landscape.

Future Prospects to Regulate Cryptocurrency in India

Looking ahead, India is actively promoting the creation of uniform crypto legislation at the global level. During its G20 Presidency last year, India played a pivotal role in collaborating with the International Monetary Fund (IMF) and the Financial Stability Board (FSB) to draft a roadmap for the legalization of crypto assets across all G20 member nations. This international collaboration reflects India's commitment to developing a global consensus on how to regulate cryptocurrency effectively.

Currently, G20 countries are engaged in analyzing the potential benefits and risks associated with crypto assets. The next phase involves working with global standard-setting bodies to determine the necessary measures for regulating these assets. India’s proactive stance in this global dialogue indicates its recognition of the importance of a coordinated approach to crypto regulation.

Sharat Chandra, founder of blockchain-focused EmpowerEdge Ventures, has suggested that India's approach to regulate cryptocurrency will likely remain steady until a global consensus is reached. He emphasizes that the lack of immediate national regulation reflects a broader trend of waiting for international guidelines before implementing stringent local rules.

Meanwhile, the Reserve Bank of India (RBI) is making strides in its exploration of Central Bank Digital Currency (CBDC). The eRupee CBDC is currently undergoing advanced trials, with the potential to integrate with popular Unified Payments Interface (UPI) apps like Google Pay, PhonePe, and Amazon Pay. This development signals the RBI’s interest in leveraging digital currency technologies while the broader regulatory framework for crypto assets is still under consideration.

In conclusion, the current state to regulate cryptocurrency in India is characterized by a cautious approach, focusing on enhancing oversight through existing financial regulations rather than introducing new legislation specific to cryptocurrency. As global discussions on crypto regulation advance, India’s role in shaping international standards will be crucial. The government’s current strategy reflects a desire to balance innovation with regulatory oversight, ensuring that the crypto industry can grow within a framework that addresses potential risks while fostering technological advancement.

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