India Will Make Cryptos A Separate Asset Class, Bring It Under Market Watchdog

The Indian government plans to regulate private cryptocurrencies instead of going for an outright ban as suggested by some reports last week. A cabinet note from the federal government makes it clear that cryptos will be treated as an asset, but not legal currency.

Almost all cryptocurrencies slid on Indian exchanges on Nov. 24 after the proposed Cryptocurrency and Regulation of Official Digital Currency Bill 2021 appeared on Parliament's legislative agenda. The bill, which was seen as seeking to ban most cryptocurrencies, will be introduced in parliament after the federal cabinet approves it.

The cabinet note on Thursday has allayed investor fears. Crypto assets will be dealt with by the existing crypto exchange platforms, which will be regulated by India's market regulator, the Securities and Exchange Board of India (SEBI). Those having crypto assets will be notified about a cut-off date to declare the same and bring them under the crypto exchange platforms.

Anyone violating the exchange provisions will be punished with criminal imprisonment of up to one and a half years. Further, the provisions of the Prevention of Money Laundering Act (PMLA) will apply to those using crypto assets for terror-related activities.

Experts are confident that crypto assets are worth considering and can be used to bring about more financial inclusion in India, but warned against money laundering activities.

"There is a role for crypto as assets but they obviously will have to follow all the laws and make sure that it doesn't become a backdoor for money laundering ... they have to use that an entry point to get a lot of young people into financial markets," Infosys co-founder Nandan Nilekani said at the Reuters Next Conference on Wednesday.