indian crypto market: Why Sebi’s regulatory ambit could boost India’s crypto industry

The Indian crypto market is brimming with potential, with several decentralised homegrown projects taking off and building impact. However, an ambiguity around regulations has got all private players in the Web3 space tiptoeing around real use cases. The adoption rate might be high as compared to many other countries but given the percentage of the cell phone ownership rate and internet penetration, it could be much higher with clear regulatory guidelines set by the government. Here’s why bringing cryptocurrency under the purview of the Securities and Exchange Board of India (SEBI) could be a game-changer.

SEBI’s Proven Track Record

SEBI has been a cornerstone of India’s financial stability for the past quarter-century. Its achievements include:

  • Market Regulation & Investor Protection: SEBI established robust frameworks for stock exchanges, mutual funds, and other instruments. This experience in safeguarding market integrity and protecting investors can be replicated for crypto as well and is very much a need of the hour
  • Technological Advancements: SEBI introduced electronic trading platforms, streamlining processes and increasing efficiency. This adaptability bodes well for regulating a fast-evolving sector like crypto. It can also solve various challenges such as fiat on ramp, on-chain fund transfer, etc.

SEBI has always worked towards creating a market that isn’t too stringent for its participants while also ensuring efficiency, security, and order. In the regulatory regime, SEBI has always strived towards ensuring transparency and remained appropriate and effective. This approach could unlock the right environment for the regulation of virtual digital assets where rules aren’t too rigid but at the same time, conducive.

Crypto Tracker

Building Trust and Transparency:

  • KYC and AML Norms: SEBI enforces KYC (Know Your Customer) and AML (Anti-Money Laundering) practices for traditional financial instruments. Applying these to crypto exchanges can enhance transparency and combat illegal activities. The data from Chainalysis mentioned previously (14% of crypto transactions linked to illicit activities) highlights the need for such measures.
  • Investor Protection Mechanisms: SEBI has established investor grievance redressal mechanisms for traditional markets. They can adapt these to handle crypto-related disputes, providing a safety net for investors and fostering trust in the system.

Creating a Stable Regulatory Environment:

  • Standardised Practices: SEBI’s experience in regulating stock exchanges can be leveraged to establish clear listing requirements and trading guidelines for crypto exchanges. This would bring much-needed stability and predictability to the Indian crypto market. This could also help in smoothing over any market manipulations
  • Regulation by an Established Body: The Indian crypto market has the potential to be worth $240 billion by 2030, according to Assocham. SEBI’s established reputation can legitimise the market, attracting institutional investors specific to the country, as well as unbanked individuals who can use crypto to earn some passive income
  • Adaptable Regulatory Framework: SEBI’s has a history of quickly adapting to evolving technologies in the financial market. It has taken the Indian financial market to new heights, made it equitable, accessible and easy to navigate. Integrating new technologies in sync with the fast-paced crypto ecosystem can be beneficial towards the industry.

In addition to these, SEBI offers a variety of programs to promote financial literacy across India. They train local representatives to conduct free workshops in multiple languages for various groups like homemakers and middle-income families. Additionally, SEBI collaborates with investor associations and conducts mass media campaigns to educate the public about smart investing and avoiding scams. This could be a great leap forward for the Indians who are yet to get exposure to crypto or avoid it due to technological hurdles and lack of understanding. Conclusion

SEBI’s experience and achievements make it well-positioned to oversee the crypto sector. By bringing crypto under its ambit, SEBI can create a more secure and trustworthy environment for investors, paving the way for a flourishing and responsible crypto ecosystem in India. It can also lay the foundation for a collaborative global synchronisation to streamline the sector and collaborate on investigating any irregularities that may emerge. Regulation shouldn’t stifle innovation. SEBI can strike a balance by establishing clear rules that protect investors and promote responsible growth within the Indian crypto market.

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About the Author: Daniel