The government may entrust the responsibility of overseeing cryptocurrency trading to Gandhinagar-based Gujarat International Finance Tec-City (GIFT).
The government is thinking of appointing GIFT-based International Financial Services Centres Authority (IFSCA) as the regulator for crypto trading, sources told BusinessLine. This is after two of the country’s main banking and financial market policy-making authorities — the Reserve Bank of India and SEBI — appear not very keen on regulating the crypto market.
Regulatory vacuum
Crypto trading runs into billions of dollars on the newly-launched crypto exchanges in India, including CoinDCX, WazirX, Zebpay, CoinSwitch Kuber and UnoCoin. But all of these are operating in complete regulatory vacuum. The RBI has said it is not in favour of crypto trading but in March the Supreme Court scuttled the banking regulator’s move to prevent banks from supporting crypto transactions.
The apex court reasoned that the RBI cannot disproportionately restrict trading in cryptos in the absence of a legislation declaring them illegal. This year the government held back its Bill to ban cryptos and instead changed its stance to regulating them.
“The government’s view is that the crypto market should be tested with a regulatory sandbox. Unlike SEBI and the RBI, IFSCA chief Injeti Srinivas is not averse to crypto markets and has not expressed any reservations against regulating them. Nothing is finalised but the government is in no mood to kick the can any further on crypto trading. The Budget could see some announcement on the roadmap ahead for crypto trading,” said a source close to the Centre’s thinking.
New crypto platforms can register with IFSCA and follow the norms set by the regulator at GIFT. These exchanges may also be required to shift operations to GIFT City.
The practical hurdle for the RBI and SEBI in regulating crypto currencies is that their origin is mysterious and they have no jurisdiction on global platforms where the price discovery is concentrated. In contrast, GIFT was created to cater to global market assets.
India’s retail investors can trade in GIFT using the remittance scheme up to ₹ 3.30 crore per person per year. According to experts, this cap would also help the Centre prevent high-value speculation by individuals in crypto trading in the initial phase.