SEBI Embraces Crypto

The Indian financial landscape is currently at a crossroads, with Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) at odds over the future of cryptocurrency trading. While SEBI embraces crypto oversight, the RBI adopts a more cautious stance, wary of the macroeconomic risks posed by private cryptocurrencies.

SEBI’s Collaborative Regulatory Vision

In a move that diverges from the RBI’s traditional cautiousness, SEBI has suggested a collaborative regulatory environment for the cryptocurrency sector in India. It advocates for a division of oversight responsibilities among various financial authorities, akin to the regulatory framework in the United States where digital assets and ICOs fall under the purview of different bodies, including the SEC.

Oversight of Crypto Securities and ICOs

SEBI is positioning itself to oversee cryptocurrencies that are classified as securities, along with new crypto trading offerings like ICOs. The regulator is also considering granting licenses for crypto products related to the equity market, paving the way for their inclusion in the established financial system.

Regulation of Stablecoins and Pension-Linked Assets

The proposals recommend that the RBI should take charge of regulating stablecoins and other digital assets pegged to fiat currencies. In parallel, the IRDAI and the PFRDA would manage insurance and pension-related virtual digital assets, respectively.

Investor Grievance Redressal

To enhance investor confidence in the cryptocurrency market, SEBI has proposed that disputes involving cryptocurrency traders be addressed under the existing Consumer Protection Act, offering a well-known and accessible mechanism for grievance redressal.

RBI’s Cautious Stance on Cryptocurrencies

Contrary to SEBI’s forward-thinking stance, the RBI remains cautious, expressing concerns in its communications with the government panel that private digital currencies could introduce macroeconomic instability if integrated into the financial ecosystem.

Concerns over Tax Evasion and Voluntary Compliance

The RBI has voiced apprehensions about cryptocurrencies potentially enabling tax evasion and the challenges of ensuring compliance in decentralized P2P transactions, highlighting these as threats to fiscal stability.

Loss of Seigniorage Income

Moreover, the RBI has raised concerns over the potential loss of seigniorage income, a significant source of revenue for central banks derived from the issuance of currency, due to the rise of private digital currencies.

Historical Attempts to Exclude Cryptocurrencies

Historically, the RBI has been resistant to cryptocurrencies, exemplified by its 2018 directive that barred financial intermediaries from engaging with crypto exchanges and users—a decision that was overturned by the Supreme Court.

Stablecoin Ban: RBI’s Ongoing Efforts

Despite the Supreme Court’s ruling, the RBI continues to push for the exclusion of cryptocurrencies from India’s formal financial system, urging financial institutions to adhere to strict anti-money laundering and foreign exchange rules to keep digital assets at arm’s length.

The Evolving Regulatory Landscape

Despite the RBI’s cautious stance, the cryptocurrency ecosystem in India has continued to thrive. In 2022, the government introduced a tax on crypto transactions, marking a significant step towards cryptocurrency exchange regulation. Additionally, a mandate was issued requiring all exchanges to register locally before engaging in crypto trading within the country.

A PwC report highlights that 31 countries globally have embraced cryptocurrency by implementing regulations that facilitate the trading of this emerging asset class, showcasing the worldwide momentum towards its acceptance.

Implications of the SEBI-RBI Divergence

The differing views of SEBI and the RBI on cryptocurrency regulation carry profound implications for India’s digital asset industry. SEBI’s willingness to explore a collaborative, multi-regulator approach could significantly enhance both institutional and retail participation in the cryptocurrency market. Conversely, the RBI’s apprehension may pose challenges to the sector’s expansion and its integration into the broader financial ecosystem.

Potential for Regulatory Clarity and Investor Confidence

SEBI’s initiative to create a comprehensive framework for the cryptocurrency market, covering securities, ICOs, and pension-linked assets, is poised to bring regulatory clarity. This move is expected to bolster investor confidence in crypto trading by providing a safer and more transparent environment.

Risks of Fragmented Oversight and Compliance Challenges

On the other hand, the RBI’s firm stance on prohibiting stablecoins and its historical skepticism towards cryptocurrencies could lead to compliance difficulties and a fragmented regulatory landscape. This stance threatens to impede the development of a unified and regulated cryptocurrency ecosystem in India.

The Road Ahead: Striking a Balance

As the Indian government panel dedicated to cryptocurrency policy nears the completion of its report, the urgency for a balanced approach is paramount. Harmonizing the contrasting perspectives of SEBI and the RBI is essential for achieving a regulatory environment that encourages innovation while addressing potential risks in the cryptocurrency sector.

Collaborative Policymaking and Stakeholder Engagement

The success of crafting a comprehensive regulatory framework for the cryptocurrency and web3 industry hinges on effective collaboration among regulators, policymakers, and industry stakeholders. An ongoing dialogue and openness to diverse perspectives are key to navigating the complexities of this rapidly evolving field.

Balancing Innovation and Risk Mitigation

The key challenge lies in leveraging the potential of cryptocurrencies and blockchain technology while addressing the RBI’s macroeconomic and fiscal concerns. A balanced, adaptable approach that prioritizes innovation and risk management will be critical for India to successfully navigate the cryptocurrency landscape.


The divergent stances of India’s financial regulators, SEBI and the RBI, on cryptocurrency regulation have cast a shadow of uncertainty over the country’s crypto ecosystem. As the government panel moves to finalize its policy recommendations, adopting a balanced and collaborative approach becomes crucial. Reconciling the views of SEBI and the RBI, along with engaging industry stakeholders, can set the stage for a robust, well-regulated cryptocurrency market in India. This approach not only mitigates potential risks but also capitalizes on the benefits of this emerging technology, positioning India as a leader in the global digital asset revolution.

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. Cryptocurrency investments are subject to market risks, and readers should do their own research and consult with professionals before making any investment decisions. Hash Herald is not responsible for any losses in the market.


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