The decentralized nature of cryptography makes regulation difficult CryptoBlog

The Indian market regulator, the Securities and Exchange Board of India (SEBI), says the decentralized nature of crypto assets makes consumer protection and regulatory enforcement difficult.

SEBI on cipher regulation

The Securities and Exchange Board of India (SEBI) reportedly told the Parliamentary Standing Committee on Finance that the decentralized nature of crypto assets makes it difficult for any consumer protection or regulatory enforcement of this asset class.

Noting that “crypto assets are held in decentralized distributed ledgers,” local media quoted SEBI as saying:

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There is a high probability of carrying out unauthorized transactions that do not comply with a regulatory framework.

The market regulator has highlighted the need to clarify whether crypto assets are securities. “If crypto assets are not blocked, there is a need to characterize the tokenized version of the asset based on functionality, which can enable oversight by various industry regulators,” SEBI noted.

The regulator explained that there can be more than one crypto regulator, noting that different aspects of the crypto industry can be supervised by different regulators.

SEBI explained that consumer products must be protected under the Consumer Protection Act. The Reserve Bank of India (RBI) can also regulate cryptocurrency trading platforms under the Foreign Exchange Management Act (FEMA). The SBI added:

The digital currency acts as a bridge between the fiat currency of a foreign jurisdiction and the Indian rupee.

The market regulator clarified that exchanges regulated by SEBI cannot redeem crypto assets without declaring them as securities. The regulator noted that under Section 2(j) of the SCRA, 1956, “a stock exchange may only provide “assistance, regulation, or control of the buying, selling or trading of securities for trading activities.”

SEBI has also proposed several measures to the Advertising Standards Board of India. Last month, SEBI proposed banning celebrities and public figures from licensing crypto products.

While crypto income and transactions are taxed in India, the government has not yet introduced a regulatory framework for crypto assets.

Ministry of Finance officials have consulted with the World Bank and the International Monetary Fund (IMF) on regulating cryptocurrencies. The country’s finance minister has said the government will not rush to come up with a crypto policy. The government is currently finalizing an advisory document on cryptocurrencies.

What do you think of SEBI’s comments? Let us know in the comments section below.

Kevin Helms

Kevin, an economics student from Austria discovered bitcoin in 2011 and has been a evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection of economics and cryptography.

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