India resists regulating cryptocurrencies for fear of legitimizing the industry: report

By Hannah Pérez

The Indian government is reluctant to introduce legislation to regulate cryptocurrencies, Reuters reported, citing a government document. Meanwhile, the global panorama points to the opposite direction.

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The Indian government is reluctant to introduce legislation to regulate cryptocurrencies.
According to the government, the use of cryptocurrencies in India is not significant or represents threats.
India leads for global adoption of cryptocurrencies, according to Chainysis.
Meanwhile, the global panorama points to favorable regulatory changes for crypto.

India is not willing to create specific legislation on cryptocurrencies, arguing that a regulation could grant you “legitimacy”To this kind of assets, according to a report from Reuters Posted on Wednesday.

An exclusive government document, prepared this month and was seen by Reutersreflects the position of the Bank of the Reserve of India (RBI), which considers that containing the risks of cryptocurrencies by regulation would be difficult in practice.

Regulating these digital assets would grant them “legitimacy“And it could make the sector become”systemic“, Increasing the dangers for financial stability, the document details, according to the report.

Although a total prohibition could address the risks “alarming”Derived from majority speculative digital assets, it would not be effective against transfers between peers or operations in decentralized exchanges, the authorities would argue.

India opposes cryptocurrency legislation

India, which leads global cryptocurrency adoption trends according to Chainysiscurrently maintains a partial supervision approach: global cryptocurrency exchanges can operate in the country if they are registered locally with a government agency for verifications against money laundering, and punitive taxes on cryptocurrency profits are applied.

These measures, together with the repeated warnings of the Central Bank, have caused the crypto transactions within the formal financial system to remain out. Indians have investments worth USD $ 4.5 billion in various cryptocurrencies, an amount that, according to the document, is not significant or represents a systemic risk for financial stability.

Current limited regulatory clarity has helped contain the risks in the regulated financial system, with tax laws and other provisions that act as dissuasive for speculative trade and penalize fraud and illegal activities, adds the report.

However, given the variability in global regulatory approaches, “Drawing a clear path forward or identifying a uniform policy approach is not simple“concludes the document.

Crypto regulations in India

The Indian government has made legislative efforts associated with cryptocurrencies in the past. In 2021, the Indian government prepared a bill to prohibit private cryptocurrencies, but finally did not present it, as recalled The Block.

During his presidency of the G20 in 2023, India advocated a global framework to regulate these assets. In 2024, he planned to issue a discussion document about his cryptocurrency position, but postponed it to review the developments in other jurisdictions.

Changing international panorama

The last developments in India occur in a context of greater acceptance of cryptocurrencies in the international scene, with the regulatory approach improving since Donald Trump assumed the position in the US.

Trump signed the genius law in July to establish federal rules for Stablecoinswhich has generated greater global attention for this kind of assets linked to fiduciary coins -most of them with parity in the US dollar. However, the Reuters report highlights that this generalized use could impact both advanced and emerging economies, including India.

China maintains a prohibition, but considers allowing Stablecoins Backed by Yuan, while Japan and Australia develop regulatory frameworks with caution. In addition, governments in the United Kingdom, the European Union, Hong Kong and South Korea are strengthening their regulatory frameworks for cryptocurrencies, while in the USA, bipartisan efforts continue in a market structure law.

The cautious posture of India underlines the balance between innovation and financial stability in a volatile sector, while the world observes the regulatory advances in powers such as the United States.

Article written with the help of AI, edited by Diariobitcoin

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