India to publish crypto policy discussion paper by September 2024

Regulators in India are looking to publish a discussion paper regarding the nation’s stance on cryptocurrencies by the end of 2024.

In a recent interview, Ajay Seth, secretary of Economic Affairs, said the discussion paper will shed light on the government’s stance towards crypto. The paper will look to solicit comments from relevant stakeholders in crafting crypto policy in one of the world’s most populous countries.

“In India it (cryptocurrencies) is being regulated from the perspective of AML and EFT alone. Regulation starts and ends there, it cannot be beyond that, so should the remit be more? What should be the policy stance? All that will come out in the discussion paper.”

Ajay Seth, secretary of Economic Affairs

An inter-ministerial group comprising multiple regulators is drafting the discussion paper. The group is reportedly exploring a “wider policy for cryptocurrencies,” says Seth.

The discussion paper is expected to come out before September.

The group includes the Reserve Bank of India, the nation’s central bank, and the Securities and Exchange Board of India, its market regulator.

The RBI has historically opposed allowing cryptocurrencies in India, citing risks to the nation’s economic stability. As such, the central bank has proposed a complete ban on cryptocurrencies instead of regulating them.

Meanwhile, India’s securities regulator has portrayed a more favorable stance. In May 2024, SEBI said the nation should take a multi-agency approach to crypto legislation. The suggestions, presented to an advisory panel, outlined plans to delegate oversight to various agencies like the Insurance Regulatory and Development Authority of India.

Further, Seth pointed to an IMF-FSB synthesis paper published in July 2023, advising against an outright ban on digital currencies. The finance ministers and central bank governors (FMCBG) from G20 nations adopted the global regulator’s proposal in October.

The IMF-FSB proposal came during India’s presidency at last year’s G20 summit. Seth hinted that those frameworks might be considered when drafting the policy paper.

Sumit Gupta, co-founder of Indian crypto exchange CoinDCX, lauded the move, stating that it is a “significant step” towards regulating the crypto sector.

“As key stakeholders in this sector, we urge the government to actively seek input from domestic businesses. Engaging with local businesses will ensure that the regulatory framework is robust, inclusive, and supportive of innovation,” Gupta told crypto.news.

India currently doesn’t have a crypto regulatory framework in place but has imposed a 30% tax on profits generated via cryptocurrencies, alongside a 1% tax deducted at the source. However, that hasn’t stopped the regulators from clamping down on the sector.

India’s Financial Intelligence Unit has mandated licensing for crypto service providers operating in the nation, and as a result, several off-shore crypto exchanges were blocked earlier this year.