The demand for cryptocurrency in India has been growing at a rapid pace. The growth has been coming not only from metros but also from small cities and towns. According to the Blockchain and Crypto Assets Council (BACC), part of the Internet and Mobile Association of India (IAMAI), India holds about Rs 6 lakh crore in crypto assets. Incidentally, a few of the leading crypto exchanges have already overtaken Zerodha, which is India’s largest stockbroker, in the number of users. For example, while Zerodha has around 7 million users, CoinSwitch Kuber and WazirX claim to have a higher user base of 10 million and 9 million respectively.
This huge retail participation necessitates a strong framework of regulations for cryptocurrencies. While the Reserve Bank of India has time and again cautioned investors on the potential pitfalls of the digital currency the Indian government has so far been following the middle path of looking to strictly control while also promoting the use of blockchain technologies. Until no regulatory clarity comes forth, the Indian exchanges have been following self-regulatory practices, which include abiding by KYC verification and AML compliance policies.
“As the popularity of crypto as an asset class investment continues to rise, countries across the world have been taking steps to ensure a secure ecosystem for users. Crypto exchanges in India are following self-regulatory practices, very similar to what the other regulated financial entities follow, to provide comfort and trust to regulators and users. Even though crypto investing is currently unregulated, we want to be future-ready. Among various other measures, we use a robust Know Your Client (KYC) process during our user onboarding. To start trading on our platform, it is required that the name on KYC documents match the bank account details to validate the user’s identity. Only resident Indian bank accounts are permitted on the platform. We also do a name screening (for Politically Exposed Person status, sanctioned list, and negative news) when the user is making payment beyond a threshold level,” said Ashish Singhal, Co-chair, BACC, and Founder and CEO, CoinSwitch Kuber.
Avinash Shekhar, Member of BACC and Co-CEO of ZebPay, said “Many countries such as Japan, Singapore, the U.K., and the US have implemented regulatory frameworks for crypto assets to democratise access and protect investors. When it comes to India, we have unique situations for which our authorities are trying to find solutions. For example, we still have a large population base that is underbanked or unbanked. We are looking forward to a regulatory framework that addresses all these issues. Given this situation, self-regulation was the only option there was and we’ve been following that from the very beginning. What this means for ZebPay is following stringent KYC verification and AML compliance policies for all members who use our platform. This ensures appropriate safety measures are followed and investor funds are secured.”
Crypto’s regulations globally
El Salvador has become the first country to officially declare Bitcoin as the legal currency of the country. But there has always been a debate whether cryptocurrency should be considered as an asset class, a currency, a utility or a security. While India is still in the middle of framing cryptocurrency regulations, let’s look at the framework in major economies that treat cryptocurrency as an asset and not a currency:
The US has the better investor protection laws for the cryptocurrency as an asset class as well as on tax from capital gains. Just like India, the country has a dual legislative system where both the Central and the State governments can form regulations.
Some of the states with favourable regulations include Wyoming that in 2019 passed several blockchain laws recognising crypto assets as digital assets. Moreover, Coinbase, a US-based exchange is listed in the NASDAQ reflecting the clearer crypto laws of the country.
In the UK also it has been made clear by the tax authorities that cryptocurrencies can be considered as a capital asset. The country’s tax authority Her Majesty’s Revenue and Customs (HMRC) has said that gains or losses on cryptocurrencies are subject to capital gains tax. Moreover, exchanges need to be registered with the Financial Conduct Authority (FCA) and take all measures to protect customers. They also need to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) initiatives.
Singapore has seen an expansion in the crypto market ever since China started a crackdown on crypto mining. The growth has been on the back of clearer crypto rules in the country where the Monetary Authority of Singapore (MAS) implemented legislation under its Payment Services Act. In Singapore for facilitating transmission, exchange or storage of cryptocurrencies an entity needs to hold a license. Similarly, regulations in the country provide clearer guidelines with respect to compliance as well as for AML and CTF initiatives.
Also Read: Twitter is building a cryptocurrency team to bring blockchain and crypto solutions to its platform
Also Read: RBI governor Shaktikanta Das says cryptocurrencies are serious threat to any financial system till they are regulated
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